FXStreet (Barcelona) – Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, sees the increased optimising over a Greece deal with its creditors and the recent Eurozone CPI as being the key factors behind EUR/USD’s upside climb.
Key Quotes
“The sell-off in the euro-zone government bond market and higher euro have been triggered by the combination of increased investor optimism that Greece and its creditors are moving closer to reaching an agreement to extend short-term financing, and by the release of the stronger than expected euro-zone inflation report for May.”
“It has been reported that the creditors have put aside their differences and agreed upon proposals which will be presented to Greece today. Officials hope that the Greek government will agree to the proposals by Friday.”
“However, there are still doubts that the Greek government will agree to all the proposals having already submitted its own separate proposal to the creditors earlier this week.”
“If a political deal is reached by Friday, officials are hoping a more comprehensive staff level agreement can be finalised by the end of next week. It has also been reported that the creditors are considering a plan to extend the bailout through the summer.”
“The latest euro-zone CPI report revealed that the annual rate of headline inflation accelerated by more than expected to 0.3% in May. Core inflation surprised notably to the upside rising by 0.3 percentage point to 0.9% in May reaching its highest rate since August of last year. The report has helped to ease euro-zone deflation concerns and highlights that the ECB’s aggressive monetary easing is helping to lift inflation.”
“The ECB are likely to acknowledge the recent favourable progress at their upcoming policy meeting today. The ECB’s updated staff forecasts are likely to reveal a modest upward revision to their near-term outlook for inflation in part reflecting a weaker euro and the recent rebound in the price of crude oil.”
“Nevertheless we still expect President Draghi to reiterate that the ECB intends to carry out its QE programme in full until at least September of next year. In these circumstances, we continue to doubt the sustainability of euro rebounds.”
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