The euro rose by nearly 1p against the pound to 88.408p and it rose by 1.5 per cent or 5 cents against the dollar to $1.3672.
The surge came after finance ministers from the 16 eurozone countries agreed the loan package yesterday by teleconference, although Greece is still hoping not to need to draw on the loans and that its austerity measures will be enough.
On Friday, Fitch Ratings downgraded Greece to BBB-, just one notch above junk status.
Creditsights analyst David Watts says Greece must use the breathing space offered by this package to slash spending and increase tax revenues if it is to reduce its deficit of 8.7 per cent over the next few years. He says this will be even more challenging in the face of growing debt obligations the country must face in the next two years.
Watts says: “Greece has its work cut out if it is to rein in its runaway debt ration. Given the scale of the refinancing hurdle over the next four years, it will be a test of Greek politicians’ resolve to force voters to endure the full pain of any cuts.
“But Greece is not the only country in the region in which deficits are a problem and the process by which the EU arrived at this latest solution has been close to farcical. The good news is that the relief trade will be on in earnest and this time it should last for more than just a few trading sessions. But the core problem of overleveraging has been masked, not mended and it simply remains to be seen where – and when – it will next appear.”