The US Dollar to Euro (USD/EUR) exchange rate continued to trade close to an 11-year high on Wednesday as traders remained jittery over the Greek election victory for the left-wing Syriza party.
Concerns increased that the Greek government led by Prime Minister Alexis Tsipras will clash with the Troika of the European Union, European Central Bank and International Monetary Fund over the nation’s bailout terms.
USD/EUR to reach parity Due to Greece
‘The Euro will crash through parity with the US Dollar before the end of the year, and when it does, Eurozone assets, and equities in particular, will be a bargain for foreign investors,’ said Matthew Lynn from MarketWatch.
The coalitions rule got off to a shaky start in terms with relations to the EU after Greece raised questions over EU sanctions against Russia regarding the Ukraine crisis. The nations finance minister also described the bailout as a trap. Germany meanwhile warned Tsipras not to abandon Greece’s prior agreements on aid.
Some economists are forecasting that the Euro could fall to parity against the US Dollar as they predict that the clashes between the Greek government and the troika will likely escalate. Over the coming months the Euro will likely take a big hit as Berlin, Athens and Brussels clash. The ECB has already had its fair share of run-ins with Berlin over its plans for monetary stimulus measures and the German government is unlikely to concede any ground to the Greeks.
Despite the expected clashes, Greece is likely to win the standoff and the troika will have to compromise or see Greece leave the Eurozone, an event that neither side wants and one that the EU cannot afford to happen.
If it does and Greece goes on to succeed on its own then other countries such as Spain and Portugal could consider leaving too and bring the entire single currency crashing down with them. Syriza’s election victory is sure to have boosted support and increased the determination of other anti-austerity political movements across Europe. They could achieve election wins of their own. In short, the entire European project is in jeopardy.
US Dollar to Euro (USD/EUR) Exchange Rate Forecast
The US Dollar is forecast to hold onto gains against the Euro as the Federal Reserve is expected to retain its language pledging to be patient as to when it will hike interest rates.
‘The Fed still wants to put out the message we’re on this glide path to higher rates, but they will be worried about what goes on in the rest of the world. There are so many conflicting data, I don’t think we’ll see a lot of change,’ said Lee Ferridge, head of macro strategy for North America at State Street Corp.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.1343 ,
Euro,,British Pound,0.7474 ,
Euro,,Australian Dollar,1.4232 ,
Euro,,Canadian Dollar,1.4120 ,