Yesterday (22nd June), EUR/USD declined because of concerns over Grexit. Euro went down by 0.3% against dollar, from the open of 1.1310 to the close of 1.13384.
At the moment, EUR/USD is traded at 1.12276.
Euro is likely to decline against dollar because of the following reasons:
- The emergency summit yesterday has not provided market with much information about Greece’s fate. President of European Commission (EC), Donald Tusk, said Greece’s proposal was a basis for a progress. Greek Prime Minister, Alexis Tsipras, has been given 48 hours to meet creditors’ demand and break standoff to avert default. This is the main cause of downward pressure on euro.
- Greece’s new proposal has faced protest from leftish government, who refuse to continue “belt-tightening” policy. Even if the proposal is accepted by creditors, it may not be implemented because of internal conflicts. Political uncertainty will pose a major threat to Greece.
- Greek people continue to withdraw deposits from Greece’s banks. On Monday, euro 1 billion was wiped away. People may choose other assets such as U.S. treasury, German bund or gold as heaven assets.
- Yesterday (22nd June), U.S. existing home sales surged to a 5-1/2-year high in May as first-time buyers stepped into the market. This indicates that housing market and overall economic activities were gaining momentum in the second quarter. The biggest economy in the world is showing sign of recovery, euro may lose against dollar.
- This evening, there will be data about durable goods orders, new homes sales, Richmond manufacturing index etc. Better than expected data may push dollar higher and hurt euro.
However, euro may went up against dollar because of the following reasons:
- The European Central Bank (ECB) raised emergency funding (ELA) for Greece for the third time in less than a week, people familiar with the matter said. The ELA has reached euro 87.8 billion. It seems ECB still wants to keep Greece in Euro zone.
- Euro zone’s flash PMI reached 54.1, the record high level since May 2011, which shows sign of recovery in the single currency area. This may help to lift euro.
Forecast: Euro is likely to decrease against dollar, one euro may be traded at $1.11740.