In the first session of the week in this month (3rd August), the pair EUR/USD fell by 0.2% compared to the opening price of $1.09705. Ending the session, the price closed at $1.09846, dropping toward the $1.09000 area.
Euro zone’s manufacturing activities has signal of slowing down when PMI index of Germany, France, Italy, Spain did not change much from the previous month. Euro zone’s PMI in July reached only 52.4 points, changing little compared to June’s 52.2. The reason is that Chinese stock slump and its economy falling into recession affecting bigger economies in the Euro zone such as Germany, France and Netherlands because these countries have foreign trade linked closely with China.
Greek debt crisis remains threats to economic and political stability, that drags the Euro down recently. Yesterday, the Greek stock market reopened after 5 weeks of freezing with a decline of 30%, signals that investor confidence in the Greek stock market is declining significantly. Meanwhile, Greece is facing the ECB’s bond debt which will mature 20th August. Ineffective assistance of Euro zone and the European Union (EU) for Greece is one of reasons for Credit ratings agency Standard & Poor’s downgraded its outlook for EU, from stable to negative. That means S&P may downgrade the credit of the European Union currently at AA+- in 2 years, threatening the value of the Euro in the future.
The positive news from Greece, which is the country’s banks may not need the European Central Bank (ECB) to increase emergency liquidity assitance (ELA) in weeks because the liquidity buffer of Greece increased. Last week, Greece did not request ELA increase, a sign that its banks are stablizing. ECB will discuss again on the 4th of August about ELA in the non-policy meeting.
Worries about Euro zone’s economy, as well as uncertainty in Greece pushed the Euro down against the Dollar.
In the U.S, ISM manufacturing PMI in July fell to 52.7 points, lower than the previous month’s data was 53.5, signaling that the U.S economy is not really recovering as expectation. The data supported the U.S dollar index fell, boosting the pair EUR/USD up in the U.S morning session yesterday.
In the long term, however, the pair EUR/USD remains pressured downward trend by the difference in monetary policy between 2 central banks. While the US Federal Reserve (Fed) expresses their confidence in the strong recovery of the economy, helping this financial institution will soon raise interest rates this year, the European Central Bank (ECB) maintains its huge economic stimulus program, pumping about 60 billion euros each month until September 2016. Meanwhile, data from the ECB’s website showed ECB has exceeded 61.3 billion Euros ($67 billion) to buy government bonds in July, more than its monthly target.
Currently at 2:00 GMT+7, EUR/USD is trading at $1.09555, increasing by 0.05% compared to the opening price of $1.09488.
Forecast: The pair is still in bearish trend. It’s likely today that EUR/USD will drop toward $1.09000 and the price may fall to the support level of $1.08100 achieved in 20th July.