Yesterday EUR/USD swung wildly with the volatility of 1.1%, the price closed at $1.10082, up just 0.08% compared with the opening price at $1.10000. There are many different factors driving this pair today.
Dominating the market is still Greece. After European officials agreed on Greece debt deal last Monday (July 13th), the creditors gave Greek Congress 72h to vote for passing the austerity measures towards the 3rd bailout. However, the market remains skeptical about the results of the vote today, when the governing party Syriza is notable for anti austerity position. Many people believe that Prime Minister Alexis Tsipras will meet numerous difficulties to convince Congress to pass the policies of raising taxes, cutting pensions and limiting government spending.
If new reforms were passed, the German parliament will have a special meeting on next Friday (July 17th) to discuss of opening new bailout negotiation. Debt risks remains persistent even when Alexis Tsipras accepted creditors’ request for 86 billion euro bailout ($ 95 billion).
Willem Buiter, chief economist at Citigroup, said that in order for Greece to avoid its exit from the EU, the country will need to stabilize its political situation and recover the economy enough to make sure that the proposal doesn’t fail and is successfully implemented. It is believed that Grexit might remain a possibility over the next three years.
Meanwhile, German Financial Minister Wolfgang Schaeuble said in Brussels on Tuesday Athens should consider leaving temporarily rather than receiving another bailout.
Bailout is believed to be not enough for both debt payment and economic reforms, because Greek people have been stick to the notion “work less, rest soon” for too long.
But if the Greek Parliament rejected, Grexit is more likely. Instability in the eurozone makes the euro more vulnerable.
In terms of economic data, business confidence index of German ZEW dropped 29.7 in June more than the previous month data. This is the 5th consecutive month of declining, indicating investor sentiment in Germany as well as in Euro zone are falling.
Next, US retail sales last month show “disappointing” data, while household cut spending. Negative data sparked concerns about sluggish growth of the economy as well as the likelihood of “tightening” from Fed. Immediately, the US dollar index fell, EUR/USD rose 0.2%.
Today investors are waiting for the voting results of the Greek Parliament and the hearing of the Fed Chairman Janet Yellen.
“The retail sales were dovish today so it’s a wait-and-see (for) what the Fed says later in the week,” said Michael Loewen, commodities strategist for TD Securities in Toronto.
“Does the Fed stick to its script that it’s been saying for a very long time now or do they look to the more recent data?” (Reuters)
“Considering we have Janet Yellen speaking tomorrow, any weakness in economic data ahead of that may help soothe a few nerves,” Saxo Bank’s head of commodity research Ole Hansen said. (Reuters)
Currently, 4:45 pm GMT+7, the pair is trading at $1.10227, up 0.14% compared with the opening price $1.10073.
Forecast: Most likely EUR/USD will fall to support price at $1.09630, breaking is possible, heading toward $1.08170.