The Euro to US Dollar (EUR/USD) exchange rate registered losses in the region of -0.88% on Monday as investors felt concern that Greece may default in its International Monetary Fund (IMF) repayment on Friday. Greek Prime Minister Alexis Tsipras announced that Eurogroup leaders were ‘issuing absurd demands’ and threatened to create a political and strategic crisis if he felt creditors were continuing to pressure the nation further. Tsipras stated: ‘For those countries that refuse to bow to the new authority, the solution will be simple: Harsh punishment. Judging from the present circumstances, it appears that this new European power is being constructed, with Greece being the first victim.’
The Euro to US Dollar (EUR/USD) exchange rate dropped to session lows of 1.0889 as negotiations continued despite Greece stating a deal would be made by the end of last week. Greece is expected to face bankruptcy in the next few weeks if no deal is secured. Goldman Sachs has weighed in on the situation and suggested that new Greek elections may need to be held in order to reach an agreement after months of little progress under Syriza. Goldman Sachs economist Huw Pill commented: ‘Facing this reality, a new political mandate and thus a new government, a referendum or new elections will be required in Greece. Not only is it possible that we may need to see sovereign technical default and/or blocked Greek bank deposits in order to come to an accommodation between Greece and its official creditors, it may be necessary to do so in order to break the current impasse in negotiations.’
The Euro may also fluctuate on account of Eurozone data this week, including Tuesday’s Eurozone Consumer Price Index and Wednesday’s European Central Bank (ECB) interest rate decision. It’s not expected that the ECB will change the benchmark from the current 0.05%, but any mention of the central bank’s quantitative easing (QE) programme could cause some major Euro to US Dollar (EUR/USD) currency pair fluctuations.
Meanwhile, the US Dollar exchange rate is forecast to have an interesting week ahead with some highly influential US domestic data due to emerge. Monday will begin the data-stream with May’s US ISM Manufacturing stat, which is forecast to rise from 51.5 to 52.0 in May. However, Wednesday’s ISM Non-Manufacturing Composite index is expected to decline from 57.8 to 57.0 in May. However, perhaps the most influential data to be released this week is the US Change in Non-Farm Payrolls and Unemployment Change stats, due out on Friday. Any sign of an improving labour market is likely to see the US Dollar to Euro (USD/EUR) exchange rate rally. Furthermore, if the Greek situation worsens or the nation fails to make its IMF repayment on Friday, the USD/EUR currency pair could breach the 0.93⁄0.94 regions. The Euro to US Dollar (EUR/USD) exchange rate is presently trending in the region of 0.9163.