Forex Markets around the world rallied this morning in a direct response to European governments’ agreement on a massive financial safety net for Greece. Yesterday, Finance Ministers of the 16-nation single currency bloc agreed to offer as much as €30bn in three year loans, at around 5% interest to the debt stricken nation - this is much lower than current borrowing costs facing the debt-stricken nation, as the yield on Greek government debt rising to a record high of 7.5% last Thursday. Together with the additional €15bn expected from the International Monetary Fund, this bailout plan could possibly be the largest multilateral financial rescue ever attempted.

Following the release of the news, the Euro surged 1.2% to strike a high of $1.36906, the highest price for the single currency since March 18th. This unexpected jump comes just a few days after the single European currency dropped to within one cent of an 11-month low against the greenback (last Thursday).

In a statement made by Greece’s Prime Minister George Papandreou “With today’s decision, Europe sends a very clear message that no one, any longer, can play with our common currency, no one can play with our common fate,” Unfortunately, while this latest Greek aid package announcement may have temporarily restored market confidence in the Euro, and may make investors more willing to continue to buy Greek bonds- uncertainties continue to loom over longer term prospects for reducing Greece’s mountain of debt, which have drastically crippled confidence in the Euro.

Speculations about details regarding the Greek aid plan are making the market more comfortable that something concrete is finally being discussed and hopefully agreed upon - as a result restoring confidence in the single European currency. While the Euro may have made a substantially leap in value on the back of this news, traders will need to see more action, and less talking if the Euro is to continue this recent bullish trend. The single currency is still down more than 4% against the greenback and yen since January, making it one of the biggest underperformers in major currencies in 2010.

Similarly, the existence of the safety net for Greece may help reduce growing concerns about “domino effect” on other countries with debt problems – namely Portugal and Spain. Unfortunately in the long term, markets are likely to remain worried about Greece’s ability handle its tremendous €300bn debt, which exceeds its annual economic output by more than a quarter – especially given the country’s deep recession.

According to Greek official, the government would decide within a few days whether to ask for the aid, depending on whether market interest rates subside. Having the program on the table may be enough to shore up confidence, but without the amount of cash needed, it’s just a matter of time before Greece will actually have to take the aid package and use it.