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UBS Forecast: Euro to Greenback (EUR/USD) Exchange Rate Softer as Greece and Creditors Fail to Bridge Gaps

June 25, 2015 - Written by John Cameron

Exchange Rate News Now: EUR/USD Slips as Greek Negotiations Progress



The Euro to US Dollar (EUR/USD) exchange rate edged lower by around -0.12% on Thursday afternoon.

Whilst European officials convene in a scheduled meeting in Brussels, the shared currency slumped. Although the meeting was originally meant to address the migrant crisis in Europe, thus far discussions have been dominated by Greece. However, there doesn’t seem to have been much progress made, and market sentiment has dampened in response. Rumours are spreading that there will be another emergency meeting held over the weekend, but traders have not responded positively to this given that all subsequent meetings failed to bear fruit.

The US Dollar, meanwhile, edged lower versus many of its peers despite the fact that US labour market data produced comparatively positive results. The depreciation can be linked to pessimism regarding the timing of a Federal Reserve interest rate increase, after Deutsche Bank's chief US economist Joe LaVorgna stated his confidence was wavering with regards to a Fed liftoff. Lower-than-expected Services growth also weighed on demand for the ‘Greenback’ (USD).

The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1204.

Euro (EUR) Exchange Rate Forecast to Hold Steady against the US Dollar (USD) as Traders await Eurogroup



With European officials currently meeting to discuss the crisis in Greece, the common currency is generally holding steady versus its peers. A slight depreciation can be linked to speculation that discussions on Greece still have a long way to go and there will be many more to come. Despite five-months of drawn out discussions with little to no progress made, Greek Prime Minister Alexis Tsipras is still optimistic that a deal can be made. ‘European history is full of disagreements, negotiations, and then compromises. So after the comprehensive Greek proposals, I am confident that we will reach a compromise that will help the Eurozone and Greece to overcome the crisis,’ he said.
In addition to uncertainties on Greece weighing on investor confidence, the Euro slumped thanks to poor data out of the currency bloc’s most powerful nation. German Consumer Confidence came in at 10.1 in July, missing the median market forecast 10.2.

The Euro to US Dollar (EUR/USD) exchange rate dropped to a low of 1.1151 today.
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US Dollar (USD) Exchange Rate Forecast to Trend within a Limited Range against the Shared Currency (EUR) after US Services Growth Slows



With traders uncertain how to gauge sentiment with so much resting on the European Union summit, the US Dollar is generally holding steady versus its major peers. Should it look as if Greece will fail to secure financial aid before debt repayments are due, dampened market sentiment should see the US Dollar surge thanks to its safe-haven qualities.

A slight ‘Greenback’ depreciation can be linked to slower-than-expected services growth which offset positive results from labour market data. The preliminary figure for June’s US Services PMI dropped from 56.2 to 54.8 despite predictions of a rise to 56.5.

Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said: ‘A slowdown in the economy at the end of the second quarter may mean the Fed takes a further pause for thought before hiking interest rates. The latest flash PMI surveys showed the smallest rise in service sector activity since January and the slowest growth of factory output for over a year and a half, linked to the strong Dollar.’


UBS Forecasts US Dollar (USD) Uptrend from GDP Boost despite Predicted Delays to a Fed Liftoff, Greece to Weigh on Euro Investment



‘The FOMC kept rates on hold, but the new FOMC projections suggest that rate hikes may now begin a bit later. The Fed is still preparing for liftoff, in contrast to the European Central Bank. Even with the potential for fewer Fed rate hikes this year and next, we still expect the dollar to gain against the Euro on the back of better economic activity, political stability and yields.’

The Euro to US Dollar (EUR/USD) exchange rate climbed to a high of 1.1228 today.
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