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Greek Debt Fears Pressure EUR USD Exchange Rate

  • EUR USD Weakened by Greek Debt – IMF predicts debt will skyrocket in coming years.
  • Growth in Spain falters – GDP slips slightly at the end of the year.
  • US Dollar Weakened by Trump Order – Immigration ban against predominately Muslim countries concerns investors.
  • German Inflation Figures Ahead – Single Currency may rise as CPI forecast improves.

The EUR USD exchange rate slid nearly half a cent from its best levels this morning as a report from the International Monetary Fund (IMF) caused fresh concerns over Greek national debt.

Euro US Dollar (EUR USD) Declines in the Face of new Greece Concerns

The Euro fell this morning following a report from the IMF that predicted that Greece’s national debt could explode by 2030, becoming many times GDP as Europe’s weakest economy struggles to make reforms.

This has been exacerbated by a deadlock between Greek Prime Minister Alexis Tsipras and the European Stability Mechanism (ESM) that has delayed a second compliance review which is required to secure further loans from the bailout fund.

Markets are increasingly concerned over the possibility of Greece leaving the EU as there is little more than three weeks until Eurozone finance leaders next meet, at which time further delays could cause the debt crisis to spiral out of control. As Aristides Hatzis, professor of law and economics at the University of Athens said;

‘It is critical that a compromise is found. If these negotiations are not wrapped up by 20 February we could be looking at potentially disastrous political turmoil, which would bring back the scenario of Grexit with a vengeance.’

Fall in Spanish GDP Pressures Euro

The Euro was also weakened this morning by a slight fall in Spain’s latest GDP figures.

Growth in Spain’s economy receded from 3.2% to 3% in the third quarter and while this was in line with expectations it is the slowest growth rate since Q2 2015 and is down from 3.6% at the same point last year.

There are also concerns that rising inflation could negatively impact household consumption, which accounted for 58% of GDP last year, likely weighing on growth in 2017.

Concerns over Trump’s Immigration Policy Hinders US Dollar

The US Dollar’s gains this morning have been muted somewhat by growing concerns over President Donald Trump’s order to bar individuals from a number of predominately Muslim countries from entering the US.

While the initial order signed by Trump calls for a 90 day ban, his plans to implement far more stringent restrictions on those entering the US have many companies concerned.

Tech leaders such as Google have been vocal in their condemnation of the travel ban, with some start-ups seeking to invest more in offices outside of the US to ensure they can continue to recruit from overseas.

Apple chief executive Tim cook also commented that ‘Apple would not exist without immigration’, in reference to Steve Jobs father, a Syrian immigrant.

EUR USD Exchange Rate Forecast: German Inflation Data Ahead

The EUR USD exchange rate may rally later this afternoon with the release of Germany’s latest Consumer Price Index as German inflation is predicted to rise from 1.7% to 2% in January.

Meanwhile, a possible rise in the US Personal Consumption Expenditure index could allow the US Dollar to repel the Euro’s advances, so long as it is not overshadowed by any further executive orders from Trump.

Current Interbank Exchange Rates

At the time of writing the EUR USD exchange rate was trending around 1.06 and the USD EUR exchange rate was trending around 0.93.