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Weekly roundup: Greek debt crisis back in focus

currency-newsWeekly roundup: Greek debt crisis back in focus
The euro may have managed to make strong gains to £0.8746 versus the pound, but EUR/USD ended last week at a low of $1.1163. Political concerns and a focus on the US interest rate outlook kept appetite for EUR waning.

On Tuesday the Greek debt crisis was firmly back in focus after the nation’s Eurogroup creditors failed to reach an agreement with the International Monetary Fund (IMF). This meant the next €7.5 billion in rescue funds could not be released. Greece will have to hope that an accord can be reached during Eurogroup’s next meeting on June 15th, because it has large debt repayments due in July.

European Central Bank (ECB) President Mario Draghi performed his usual trick of quashing hopes of an interest rate hike on Wednesday, after commenting in a speech that there was no reason for the ECB to deviate from its current path with regards to monetary policy. This had been largely expected, but the euro still softened.

News that the US Federal Reserve is indeed likely to raise interest rates in June, as markets had predicted, helped further weaken demand for the euro. The prospect of stronger interest rates in the US, compared to the slim returns on offer in the Eurozone, will likely prompt more investors to sell their euros for US dollars, leaving the common currency softer.

German inflation figures today could undermine the euro if they print on forecast. Price growth is expected to have weakened in May to 1.6%, taking it back below the European Central Bank’s target range. This will give the ECB justification for keeping interest rates low despite recent strong inflation data. Eurozone CPI will be released on Wednesday and is also expected to have softened.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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