The Euro to US Dollar (EUR/USD) exchange rate gave up earlier gains and the currency pair is forecast to weaken further as fears over a Greek exit from the Eurozone rise.
According to a weekly sentiment index, 23.8% of investors are now taking long positions and added to their bearish Euro bets as the odds of Greece leaving the Eurozone increased to 50%.
The rise in expectations for a ‘Grexit’ came after New Greek Prime Minister Alexis Tsipras said that he would not renounce his pre-election promises to end austerity measures and delivered a defiant speech to the nation’s creditors.
Officials from across the Eurozone warned Tsipras to pare back his ambitions for easing the financial crisis in his country. His comments have now set the stage for a clash between Greece and the rest of the currency bloc when they gather for an emergency meeting on Wednesday.
‘Greece shouldn’t assume that the overall mood in Europe has changed to the point that the Eurozone would endorse Mr.Tsipras’s entire government agenda without limitations,’ said European Commission President Jean Claude Juncker.
Greece is set to run out of money before the end of March, but with neither side backing down a ‘Grexit’ could be on the cards.
‘Someone has to say no’
‘The time has come to say what officials admit when the microphones are turned off and say out in the open. At some point someone has to say No and that role has fallen to us, little Greece,’ Finance Minsiter Yanis Varoufakis said in an address to parliament ahead of a confidence vote due to be held on Tuesday.
With tensions high between the Greek and German governments, a solution to the current crisis seems unlikely for the moment. The Greeks see the Germans as heartless austerians whilst the Germans see Greeks as rule-breakers.
There appears to be little unity in the European Union.
Also weighing upon the single currency was the release of data, which showed that industrial production in Greece fell sharply, and Portugal’s trade deficit widened sharply in December.
Those reports were enough to soften the support offered by a better than forecast Sentix Investor Sentiment report.
EUR/USD Exchange Rate Forecast
The Euro is forecast to soften further against the US Dollar as concerns over the Greek situation look set to intensify before this week’s emergency EU finance minister meeting and as economists expect US data to come in positively and add to signs that the world’s largest economy is going from strength to strength.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1331 ,
Euro,,Australian Dollar,1.4500 ,
Euro,,Canadian Dollar,1.4106 ,