The Euro holds its Ground Prior to Friday’s Greek Deadline
The euro continued its strong performance into early Thursday as Eurozone debt yields rise, giving the European Central Bank (ECB) leeway to maintain its current monetary policies. The ECB also offered a heightened inflation forecast for 2015 after recent consumer price data which indicated that deflationary pressures were not as significant as previously perceived. So far the euro rallied 2.5% against the US dollar this week, with some analysts predicting that common currency will go as high as $1.15. Greek concerns have also mounted after reports indicate that negotiations are not reaching a resolution. German Finance Minister Wolfgang Schaeuble has accused Greece's ruling Syriza party of misleading voters at the last election by promising that no significant reforms would be required in order to stay a part of the Eurozone. Greek Prime Minister Alexis Tsipras later defended his plan and expressed optimism that a deal would be reached before Friday when the country may run out of cash.
European stock markets reacted positively to announcements made in the ECB’s policy meeting. The UK’s FTSE rose 0.7%, led by WM Morrison Supermarkets, Unilever, Imperial Tobacco, and J Sainsbury that have registered gains between 2.3% and 3.0%. The German DAX rose 1.5% as major components such as BASF, BMW, and Linde gain between 1.6% and 2.0%. France’s CAC rose 1.6% amid broad market gains.
The U.S. dollar recovered after yesterday’s declines. The Dollar Index, comparing the dollar to a basket of currencies, has risen by 0.4%, retracting earlier losses. The dollar declined against the euro, losing 0.1% so far today and is currently trading 1.126. The dollar was supported by ADP’s nonfarm payroll survey ahead of Friday’s official report that has shown that 201K jobs had been added in the previous month. However, traders remain cautious in case the official report differs significantly.
Regarding important upcoming events, tomorrow’s U.S. nonfarm payroll report is still the major focus due to its implications on an interest rate hike. Today, the Bank of England will make its interest rate decision, although no major changes are expected. Eurozone GDP data will be released tomorrow prior to nonfarm payrolls.