This week has seen the Euro to US Dollar (EUR/USD) exchange rate climb steadily from a low of 1.0929 up to a weekly high yesterday of 1.1205, although the common currency is currently in decline against the ‘Greenback’.
The Euro received a much-needed boost on Monday when an unnamed Greek official announced that negotiations for the current bailout deal were likely to be concluded within the week. The official stated that ‘The horizon is by Monday night or early Tuesday’; this timeframe turned out to be erroneous, but just the idea of a solid conclusion to the month-long talks was enough to bolster the Euro considerably.
On Tuesday, Greek Finance Minister Euclid Tsakalotos confirmed the news, saying that only ‘Two or three very small details remain’ in relation to the conclusion of the talks. The Greek Finance Minister added ‘Finally, we have white smoke’, a reference to the signal used by the Vatican to indicate the successful choice of a new Pope.
Wednesday saw the common currency reach its highest point of the week. However, this gain for the Euro was tempered by an update from the Greek government about the negotiations; as a closure to the deal had clearly overshot the Monday/Tuesday proposed deadline, Thursday night was chosen as the new completion time. Although these delays were fairly minor (certainly in comparison to the countless setbacks that came before), this behaviour from the Greek government was an unpleasant reminder of just how long it had taken to reach such a supposedly concrete date for a conclusion to the deal.
Such an echo of the intolerable stalling and indecision that has plagued the bailout talks clearly brought unpleasant memories to the fore, as the Euro suddenly dipped against the US Dollar on Wednesday afternoon. This was coupled with a slight growth in the US Mortgage Applications figure for August 7
th
.
Although the German yearly Consumer Price Index (CPI) figure for July printed at 0.2% this morning, as previously estimated, this wasn’t enough to dispel doubts over the sustainability of the Eurozone bailout document. The German Federal Ministry of Finance (FMoC) has expressed serious concerns about how viable the bailout will be for Greece in the long-term, and officials said yesterday that their questions were ‘part of the review process which is not yet completed’. This apparent foot-dragging has done nothing to help the Euro’s performance, and with a proposed completion time of Friday afternoon, it seems that concerns about whether the agreement will take place before the weekend are entirely justified.
Over the remainder of this week, Euro/US Dollar exchange rate movement may occur as a result of the US Advance Retails Sales figure for July, the German and Eurozone annual Q2 GDP data and the US University of Michigan Confidence report for August.
Forecasts are optimistic for the Retail Sales results (released later today), with a 0.6% increase predicted. However, the GDP figures for the Eurozne as a whole and it’s major economies are out tomorrow morning and are likely to have an impact. The US Confidence report is optimistic for the US, however, and any further delays in the Greek situation are unlikely to encourage confidence in the strength of the Euro in the next few days.