Vang SJC

On Friday (26th June), Euro fell 1.1% against dollar mainly due to the pressure from the Greek crisis. Gap is caused by volatility last weekend, when Greek prime minister, Alexis Tsipras, called for a referendum on the terms of the international creditors. Greek banks will also be closed until the end of this week.

Currently, EUR/USD equals 1.11091 3:40 pm GMT+7.

Today, the euro is likely to decline, mainly because of the following reasons:

  • Greek crisis continues to put pressure on the euro. Greek banks will be closed until the end of this week. From now until the results of the referendum Greece, the euro is likely to continue to decline.
  • If Greece remains in the Euro zone, the currency pair may rally in short term, but will again retreat as Greece’s Euro zone’s membership is maintained. This will cause negative effects on the economy in the bloc, especially Germany , the biggest creditor of Greece. The money which could have been used to invest now must be give to a country which is unwilling to implement austerity as well as reforms. This is not a positive sign for the Euro zone economy.
  • Greek drama, PBOC’s rate cut amid stock crash have made German bund rise. German 10-year bund yields fell 16 basis points, or 0.16 percentage point, to 0.76 percent as of 8:07 a.m. London time. Treasury 10-year note yields fell 14 basis points to 2.33 percent. Investors may sell euro to buy German bond, US treasury and gold for safety purposes.

However, the EUR/USD may also bounce back because of the following reasons:

  • According to the New York Times, people still want to stay in Greece over Euro zone. The referendum could cause Greece to remain in the single currency area in Europe. This is not a positive signal for the euro zone economy in the long term, but may help in the short term rising Euro.
  • June consumer price index (CPI) of Spain rose from -0.2% to 0.1%, indicating that inflation prospects in the country. It seems QE has showed its positive effect in terms of promoting spending. Earlier, data showed consumer loans in the Euro zone is also improved.

Forecast: EUR/USD may fall to 1.10630 or edge up to 1.11330 and retreat.

Hanh Nguyen