Euro Softens as Greece Issues Take Center Stage

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EUR/USD is trading under pressure in the low 1.12s after an earlier run to 1.1260 stalled. Greece is a concern after the latest round of talks with creditors on Sunday collapsed in less than an hour. The pair has tested the waters under 1.1200, though Friday’s 1.1151 low has so far remained unchallenged. The FOMC on Tuesday and Wednesday this week will be a big focal point that may inhibit strong directional bias in dollar pairings in the meantime. No policy changes are expected from the Fed, but the statement, economic forecast revisions and Chairperson Yellen’s press conference will be scrutinized for hints of when tightening is likely to start.

In light of firmer retail sales data and consequent upgraded GDP forecasts market participants will be left with a stronger sense that a rate hike will come in September or October. Therefore the medium term view should see a stronger dollar and a bearish view of EUR/USD, especially as there isn’t likely to be a breakthrough with regard to the Greece situation over this timeframe.

The EU warned Greece could be in state of emergency next month. Commissioner Oettinger warned that the European Commission needs to make plans for a state of emergency in Greece from July 1 if the country doesn’t reach an agreement with its creditors.

In economic new, Eurozone trade surplus widened to EUR 24.3 billion in April from EUR 19.9 billion in the previous month, as nominal imports declined 1.6% month over month, while exports rose 1.1% month over month. Unadjusted data show a surplus of EUR 24.9 billion, up from EUR 14.9 billion in April last year, as exports surged 9% year over year. Despite the positive numbers, it is mainly domestic demand, especially in Germany that has been driving overall growth so far. Falling unemployment and rising real disposable income are driving consumption, while investment growth is stabilizing.

The post Euro Softens as Greece Issues Take Center Stage appeared first on Forex Circles.

Source:: Euro Softens as Greece Issues Take Center Stage

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