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Euro US Dollar Retreats from Four-Month High as Greece Central Bank Issues Warning

The Euro US Dollar (EUR USD) exchange rate slipped from a four-month high overnight on Monday as Greece’s economic woes surfaced again.

Yannis Stournaras, Governor of the Bank of Greece (BoG) warned that additional delays in Greece’s latest bailout process could do further damage to Greece’s struggling economy.

Stournaras said;

‘This delay creates uncertainty, It has started to have an adverse effect on all indicators of the economy for some months now, putting in doubt all targets, without exception, of the coming year.’

Stournaras also added that the poor implementation of reforms and were hampering growth in Greece after years of excessive borrowing in the past, an economic model that it is unable to follow in its current situation.

Meanwhile analysts from the US Bank, Citi have speculated that the delays in the bailout review and diminishing investor confidence will likely lead the Greek economy to require a fourth bailout once the current round of funding concludes in 2018.

Greece desperately needs to come to an agreement with its creditors in order to release the next round of funds before June, or the country will face the possibility of defaulting on a €7bn repayment.

Markets fear that such an event could cause Greece to crash out of the Eurozone, with the single currency struggling as talks continue to drag without resolution.

Meanwhile the Euro was also weakened this morning by the release of Italy’s latest industrial data.

EUR investors were disappointed as national statistics office ISTAT reported that industrial sales contracted at the start of the year, plummeting from 2.5% to -3.5%.

New Industrial Orders also witnessed a rapid decline as they tumbled from 3% to -2.9% in January, ending the recent uptick in growth and reaching their lowest levels since September.

Meanwhile the US Dollar has also struggled today following comments from Chicago Federal Reserve President Charles Evans that Trump’s failure to pass his healthcare bill and repeal ‘Obamacare’ has created more uncertainties for the US economy.

While he remained upbeat on his outlook for US inflation, saying in his speech at the Global Interdependence Centre Central Banking Series held in Madrid on Monday that the US inflation rate appears to be ‘well on its way’ to meeting its targets, he was less confident towards Trump’s chances of passing his ambitious economic policies.

His remarks cast further doubt on the likelihood of any additional rate hikes from the Federal Reserve aside from the three it already forecast at the start of the year, one of which was implemented earlier this month.

The US Dollar may also strike higher against the Euro later this afternoon following the release of the latest US Trade Balance, with economists forecasting that the US trade deficit will fall from -$69.2bn to -$66.6bn.

The single currency meanwhile may rally tomorrow if French Consumer Confidence holds steady at an almost ten-year high of 100, although some analysts predict that sentiment will begin to slide as it is pressured by the uncertainty of the French elections.

Looking further ahead the Euro is likely to see some volatility over the coming weeks as the UK’s exit from the EU is expected to cause some disruption to the Eurozone as the British government seeks to leave the single market.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.08 and the USD EUR exchange rate was trending around 0.92.