The Euro to US Dollar (EUR/USD) exchange rate fell in Tuesday’s European trading despite a drop in German unemployment as investors hedged their bets for the possibility of a ‘Grexit’.
Negotiations between Greece and its creditors have been slow to say the least and economists have suggested that the nation could run out of funds by early April—not a great outlook when talks appear to be at a stalemate.
Currency strategist Shusuke Yamada commented: ‘Markets are becoming more sensitive to the Greek issue. In addition, the European Central Bank’s quantitative easing is keeping downward pressure on the Euro. Fundamentals point to Euro selling.’
The Euro to US Dollar (EUR/USD) currency pair could be under significant stress next week when Greek Prime Minister Alexis Tsipras and Russian President Vladimir Putin meet. The two country heads could potential discuss a financial aid deal should talks with Eurozone finance ministers fail.
The meeting is pegged to be regarding foreign policy, but investor sentiment in the Euro could wane significantly if it turns out that Greece’s fiscal situation is discussed after the meeting was pushed forward from May.
Industry expert Simon Tilford commented: ‘This is an attempt to ratchet up the pressure on the rest of the Eurozone to make concessions to Greece. Flirting with Russia is guaranteed to antagonise the rest of the Eurozone. It will make it harder for those in Germany who were arguing for a more conciliatory line toward Greece to keep it.’
US Dollar to Euro (USD/EUR) Buoyant on Fed Hikes and Data
Meanwhile, the US Dollar is enjoying a positive week on the back of hawkish Federal Reserve comments and upbeat US domestic data. Last Friday, Fed Chairwoman Janet Yellen sent markets into a frenzy by suggesting that the Federal Open Market Committee (FOMC) predicts rate hikes will begin later in the year.
Monday then kept the ‘Buck’ bolstered when US Personal Consumption Expenditure took a surprising rise from 1.3% to 1.4% on the year in February.
US Pending Home Sales also climbed, reaching 12.0% in February on the year from 6.1%; economists had forecast a smaller jump to 8.7%.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast
The Euro to US Dollar (EUR/USD) exchange rate could be in for some major fluctuations later in Tuesday’s European trading with the release of US Consumer Confidence and the Chicago Federal Reserve’s Purchasing Managers Index. Both of the indexes are expected to rise and could positively impact the US Dollar to Euro (USD/EUR) exchange rate.
With no further Eurozone data out in Tuesday’s session, the EUR/USD exchange rate is likely to fluctuate on any developments in the Greek negotiations.
The US Dollar to Euro (USD/EUR) exchange rate is trading at 0.9307; the Euro to US Dollar (EUR/USD) exchange rate is trending in the region of 1.0750.
