Yesterday (15th June), EUR/USD increased by 0.65% from the open of 1.12098 to the close of 1.12811. The main reason for this is the statement of president Mario Draghi, saying that European Central Bank (ECB) would lift ceiling of emergency liquidity assistance (ELA) for Greek banks.
At the moment, EUR/USD is at 1.12620 at 3:53pm GMT+7.
In general, EUR/USD is likely to go down, because of the following reasons:
- Greece hardens its position and said that there will not be new proposal on the meeting held on 18th June. This means Greece will not give in to the creditors’ demand. Greece’s respond hurt stock market and lift bond yields. It means that investors are getting worried when Grexit looms. They may sell Euro for other heaven assets such as gold, U.S. treasury and German bund.
- European car sales increased with the slowest pace in 6 months as concerns rose among consumers about unemployment and Greek debt crisis.
- Organization for Economic Cooperation and Development (OECD) adjusted their forecast for global economic outlook in the beginning of June, due to to Greece’s crisis and business’s cutting on spending.
- Euro zone’s consumer sentiment declined for the second month in May, which may dampen spending and cloud inflation outlook.
- ECB’s president, Mario Draghi said even though unemployment has decreased from the record high level, it remains a problem to European officials.
- Spain bond yields jumped to 2.5% for the first time since August, as Greece hardened their position in the negotiation. It means markets are anxious amid the possible grexit.
- ZEW Economic sentiment, measuring the confidence of Germany investors and analysts, retreated to 31.5 from 41.9, the lowest level since November. It seems market sentiment was hurt by Greece’s crisis and bond volatility.
However, EUR/USD may still rebound as a result of the following reasons:
- Mario Draghi said ECB will continue to support Greek banks, which means the country’s banking system has not collapsed yet.
- U.S. States plans to slow down fiscal spending growth in 2016. They are more cautious in forecasting and budgeting as revenue tightens. Poorer revenue indicates weakness in the world’s biggest economy, which may make dollar lose against euro.
- Furthermore, U.S. government will announce building permits in May. Positive data may push dollar higher against euro; nevertheless, the effect may not last long.
Forecast: Greece’s crisis will continue to put downward pressure on Euro in London session. The price may plug to 1.0930. In U.S. session, the price may go up after economic data was announced, but then continue to decline.