The Euro to US Dollar (EUR/USD) exchange rate softened by around -0.21% on Wednesday morning.
After Greece became the first developed nation to defer on an International Monetary Fund (IMF) payment, the common currency slumped versus its peers. The potential for e Grexit has heightened significantly, and with Greek options wearing thin there is no guarantee that Greece will secure aid even if there’s a yes vote to the austerity referendum.
The US Dollar, meanwhile, edged lower versus many of its rivals after a better-than-expected consumer confidence print was countered by poor business conditions. ISM Manufacturing data, due for publication later on Wednesday, will likely provoke US Dollar volatility.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1108.
The Euro to US Dollar (EUR/USD) exchange rate declined by around -0.60% on Tuesday afternoon.
The shared currency has trending bearishly since Greek Prime Minister Alexis Tsipras called an end to negotiations with creditors, favouring instead to hold a referendum on the austerity measures proposed by the troika. Many European institutions, including the European Central Bank (ECB), have admitted that a Greek exit is very likely and have been preparing for such an event. This is likely to be emulated by other major financial institutions as Greece looks very likely to default on an International Monetary Fund (IMF) payment due today.
The US Dollar, meanwhile, advanced versus many of its peers as the crisis in Greece caused heightened demand for safe-haven assets. The advance has been somewhat sluggish, however, with Monday’s poor data weighing on rate hawk sentiment. US Consumer Confidence produced a better-than-expected results which has aided the Us Dollar uptrend.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1151.
Euro (EUR) Exchange Rate Forecast to Dive against the ‘Buck’ (USD) as Greek Crisis Escalates
After five months of negotiations with creditors, and after five years of crippling austerity measures, Greece is facing a crossroads as the populace prepares to vote on whether to accept more austerity measures in return for financial aid. Today has seen the official end to Greece’s bailout period, and there is serious uncertainty as to whether the Hellenic nation will ever unlock aid even if it votes to allow the proposed austerity program from the troika of creditors. Today is also deadline day for a consolidated IMF payment amounting to €1.6 billion, a payment which Athens is very unlikely to make.
Rumours are now beginning to surface that the Greek government is taking steps to prepare for the return of the Drachma. If Greece does vote against austerity they are essentially voting against remaining a member of the Eurozone. This could have serious ramifications for European ideals as the monetary union was designed as a way to bring Europe closer. ‘What would happen if Greece came out of the Euro? There would be a negative message that Euro membership is reversible,’ Spanish Prime Minister Mariano Rajoy said in a radio interview. ‘People may think that if one country can leave the Euro, others could do so in the future. I think that is the most serious problem that could arise (from a Greek exit).’
The Euro to US Dollar (EUR/USD) exchange rate has fallen to a low of 1.1134 today.
US Dollar (USD) Exchange Rate Forecast to Rally against the Common Currency on Safe-Haven Demand
With the situation in Greece spooking investors amid uncertainty about both Greece’s future and the future of the single currency, the US Dollar advanced significantly due to increased demand for safe-haven assets. Trader risk-aversion strategies are likely to continue until the conclusion of the Greek referendum.
The US Dollar advance has been somewhat slowed, however, after Monday’s poor data added to speculation that the Federal Open Market Committee (FOMC) will hold the cash rate until 2016. However, a better-than-anticipated result from US Consumer Confidence will satisfy hawks. June’s Consumer Confidence was forecast to advance from 95.4 to 97.1, but the actual result reached 101.4.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Hold Losses ahead of IMF Payment
Given that US data printed above expectations and the extent of the fears surrounding Greece, the Euro to US Dollar (EUR/USD) exchange rate is likely to hold losses ahead of the IMF payment. If in the very unlikely event that the Hellenic nation manages to pay the IMF, the Euro could see a modest recovery. This still won’t restore investor confidence, however, with the referendum looming.
The Euro to US Dollar (EUR/USD) exchange rate advanced to a high of 1. 1219 today.