The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.51% on Wednesday afternoon.
Despite registering positive data out of the currency bloc’s most influential nation, the shared currency declined versus several of its peers on Wednesday. The depreciation is the result of rocky investor confidence as Greece’s future in the Eurozone hangs in the balance.
The US Dollar, conversely, strengthened against its closest rivals despite a relatively poor result from the solitary domestic data publication. The appreciation can be attributed to speculation that the Federal Reserve will begin a rate hike cycle before the year ends.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0831.
Euro (EUR) Exchange Rate Forecast to Soften versus the ‘Buck’ (USD) as Grexit Threat Weighs
As time runs out before the Hellenic nation will be rejected from receiving financial aid, the threat of a Grexit is weighing heavily on investor confidence. With long drawn-out discussions showing very little progress, the potential that Greece will default on June’s heavy docket of payments due to the International Monetary Fund (IMF) could see the cash-strapped nation forced to leave the currency bloc.
Although many officials and analysts have talked-down the fallout from a Greek exit, the true impact is almost impossible to predict. It could certainly have a detrimental effect on investor confidence as every problem with a European nation would be treated with caution and uncertainty. One thing is for sure, a Grexit would not be a good situation for Greece as a new currency would be undervalued and hyper-inflation would ensue.
The Euro depreciation was somewhat slowed on Wednesday, however, thanks to positive data out of Germany. The GfK Consumer Confidence Survey was expected to decline from 10.1 to 10.0 in June, but the actual result reached 10.2.
The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.0817 today.
US Dollar (USD) Exchange Rate Strengthens against the Common Currency on Advancing Fed Bets
Although the solitary US data publication printed disappointingly on Wednesday, the US asset strengthened versus many of its most traded currency competitors. MBA Mortgage Applications declined by -1.6% in the week ending May 22nd. Although Fed Chair Janet Yellen stated that a rate increase would be subject to domestic data results, the mortgage data hasn’t had a punishing impact as it is a relatively light-weight release.
The ‘Greenback’ (USD) appreciation can be linked to futures traders bringing forward bets as to the timing of a benchmark rate liftoff. After the long succession of disappointing domestic data results caused traders to pare bets, the recent run of form has allowed hawks to push for a lending rate increase before the end of the year.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Trend Lower on Lack of Data
Given the absence of further domestic data publications to provoke volatility, the Euro to US Dollar (EUR/USD) exchange rate is likely to continue trending lower for the remainder of Wednesday’s European session. Thursday will be of interest to those trading the EUR/USD pairing with US labour market data due for publication.
The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.0930 today.
