The Euro to Australian Dollar exchange rate inched lower on Wednesday on expectations that Greece will ask the Eurozone for an extension to its current loan agreement, a move that is likely to be rejected by Germany.
The Euro to Australian Dollar (EUR/AUD) exchange rate hit a session low of 1.455
Greece and its European creditors have been clashing over measures needed to extend the nation’s €240 billion bailout programme before the deadline of February 28. Monday’s talks ended in failure as no deal was reached and led to the Euro coming under pressure as investors became increasingly nervous. Some economists said that there is now a 50% chance that Greece will leave the Eurozone.
Today’s request for an extension however eased some of those nerves but according to Greek government spokesman Gabriel Sakellaridis, they will request a bailout extension but not the austerity measures that come with it.
German Finance Minister Wolfgang Schaeuble is not convinced that an extension should be granted as the Syriza led government wants to end austerity measures.
‘It’s not about an extension of the loan programme, it’s about whether this programme is fulfilled, yes or no. I do not have any new information, but there is no loan agreement, it is an assistance program. And in this, seemingly unimportant detail lies the key: Greece would like to receive credit, but not fulfill the conditions to allow Greece to recover economically,’ said Schaeuble.
The Euro was weakened by the release of European Construction Output data, which showed that activity in the sector; fell by -3.5% in December last year on an annual basis. Economists had been forecasting for a rise of 1.97%.
Ukraine Ceasefire in Tatters
Also weighing upon the single currency are concerns over the situation in Ukraine. Government forces retreated from the embattled town of Debaltseve on Wednesday as pro-Russian rebel forces increased their assault on the strategically important transport hub.
“This morning the Ukrainian armed forces together with the National Guard completed an operation for a planned and organised withdrawal from Debaltseve,” the Ukrainian president said in a statement before travelling to the frontline in eastern Ukraine.
The capture of the town comes despite the imposition of a ceasefire on Sunday. With the fighting raging on that ceasefire has failed already and the markets are jittery that more economic sanctions will be imposed upon Russia as a result.
The Euro could soften further on Thursday if the latest French inflation data Eurozone current account data disappoints.