Greek uncertainty edges EUR/USD higher

As the chances of Greece defaulting increase, the EUR/USD rate continues to creep higher.

A man sorting euro and US dollar notes
Source: Bloomberg

Grexit fears continue to prop up euro

The uncertainty surrounding Greece continues to weigh on equity markets and at the same time paralysing the EUR/USD rate as no-one – especially the Greeks, International Monetary Fund and European Central Bank – has any idea how things will ultimately pan out over the next few days.

First up we have a Eurogroup meeting today, but judging by the fact that Greece initially handed in a three-page revision to its austerity plans then followed that up with an ineffectual meeting that saw IMF delegates leave after 45 minutes, hopes are not high that they are changing their ways just yet. Considering this, the chances that a meeting will need to be held over the weekend are almost a certainty.

EUR/USD has edged fractionally higher as the likelihood of Greece leaving the eurozone has increased, but with several twists and turns to come this could easily just be a little bit of trigger happy trading.

US growth estimates below 2014 rates

Last night saw the latest report from the Federal Open Market Committee, and the subsequent press conference from Fed chair Janet Yellen. Although the tone of commentary confirmed the FOMC was looking at an interest rate rise before the end of the year, some of this did conflict with expectations.

The growth forecast for the year is now below 2% and has fallen even further than growth rates seen in 2014. Although this is not enough on its own to prevent a change in rate, it does not offer much in the way of support for one either. Suffice to say, the cooling tone from last night was enough to see Goldman Sachs change its September date for an interest rate rise out to December.

Last night confirmed that although the US is further down the road of recovery than the UK, the speed has slowed and the reluctance to embark on any change just yet is partly being caused by the uncertainty in Europe.

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