The Euro US Dollar (EUR USD) exchange rate fluctuated this morning on the news that Athens had finally reached an agreement with its creditors over a new bailout deal.
The agreement follows months of deadlock between the two sides, with Greek Prime Minister Alexis Tsipras unwilling to impose further austerity on the people of Greece.
However with a July deadline for the repayment of €7.5bn looming, Athens was forced to cede ground and agreed to the implementation of new pension cuts and tax rises, with investors hopeful that the agreement will make it possible for Greece to restructure its massive debt.
Officials in Greece are also hopeful that the latest agreements will open the way for talks of debt relief to begin, with Greek finance minister Euclid Tskalotos saying there was ‘no excuse’ for such a discussion to be delayed further.
However it is unlikely to be the end of troubles in Greece as labour unions gear up for further strikes after around 10,000 anti-austerity protestors took to the streets on Monday, with the additional reforms agreed to by Athens likely to be deeply unpopular with the populace.
Meanwhile, Eurozone data has been mixed this morning, hindering the Euro’s attempts to advance.
Euro sentiment was initially bolstered by Spain and Italy’s latest Manufacturing PMIs, as activity jumped from 53.9 to 54.5 and 55.7 to 56.2 respectively, with growth in Italy’s factories reaching a six-year high thanks to a sharp increase in orders last month.
This led to the overall Eurozone reading also reaching a six month high as IHS Markit reported that output, new orders and employment all leapt in March.
However, investors were disappointed by the Eurozone’s latest jobless figures as the overall Unemployment Rate held at 9.5% in March, despite forecasts from analysts that it would fall to a new eight-year low of 9.4%.
Meanwhile the US Dollar is fluctuating ahead of tomorrow’s Federal Reserve rate decision.
While the Fed is expected to hold interest rates at 1% this month, observers will be looking for any hint from Fed Chair Janet Yellen that the bank will be tightening monetary policy in June.
CME Group’s FedWatch tool currently puts the odds of a rate hike next month at 67%, however a hawkish statement from Yellen tomorrow could cause these bets to soar, allowing the US Dollar to skyrocket.
However with recent US data proving to be a little lacklustre and personal income growing at only 0.2% in March, some analysts are predicting that investors may be left a little disappointed by the Fed’s outlook.
Looking ahead the EUR USD exchange rate may strengthen tomorrow with the release of Germany’s latest unemployment figures if the jobless rate falls below 5.8% in April.
The Euro may also be bolstered by the Eurozone’s first quarter GDP figures, as economists forecast that growth in the bloc will have risen from 0.4% to 0.5% at the start of 2017.
Meanwhile, excluding the Fed rate decision, the US Dollar is likely to be strengthened on Wednesday by the latest US Services PMI as analysts predict it rose from 55.2 to 55.8 in April.
Current Interbank Exchange Rates
At the time of writing the EUR USD exchange rate was trending around 1.09 and the USD EUR exchange rate was trending around 0.91.