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11 May 2015
Greece debt issue behind EUR’s recent decline – Rabobank
FXStreet (Barcelona) - Jane Foley, Senior Currency Strategist at Rabobank, views that ‘Grexit’ risk is too huge for EZ to contemplate, and further expects EUR/USD to weaken towards 1.05 on a 6-month view.
Key Quotes
“It remains our house view that some sort of compromise with Greece will eventually be reached to prevent Greece leaving EMU. Although the structural reforms implemented in recent years in other peripheral countries and the improvement in Eurozone growth prospects should act as a firewall against contagion, there is no way to predict the damage of a Grexit on the coherence of EMU and the EUR.”
“Consequently we expect that a Grexit is a risk that the EZ finance ministers will not want to contemplate.”
“That said, while a technical default does not necessary mean a Grexit, investors fear that lack of reform by Greece could mean that a compromise with the creditors may be impossible.”
“Measured from the middle of last week, the EUR is the worst performing developed world currency, dropping 1.8% vs. the USD and Greek issues has likely been a contributing factor.”
“While volatility in EUR/USD is likely to remain at elevated levels in the coming weeks, we still expect EUR/USD to trend towards 1.05 on a 6 mth view based on the expectations that the Fed could be hiking rates in Dec while the ECB continues with its QE programme.”
Key Quotes
“It remains our house view that some sort of compromise with Greece will eventually be reached to prevent Greece leaving EMU. Although the structural reforms implemented in recent years in other peripheral countries and the improvement in Eurozone growth prospects should act as a firewall against contagion, there is no way to predict the damage of a Grexit on the coherence of EMU and the EUR.”
“Consequently we expect that a Grexit is a risk that the EZ finance ministers will not want to contemplate.”
“That said, while a technical default does not necessary mean a Grexit, investors fear that lack of reform by Greece could mean that a compromise with the creditors may be impossible.”
“Measured from the middle of last week, the EUR is the worst performing developed world currency, dropping 1.8% vs. the USD and Greek issues has likely been a contributing factor.”
“While volatility in EUR/USD is likely to remain at elevated levels in the coming weeks, we still expect EUR/USD to trend towards 1.05 on a 6 mth view based on the expectations that the Fed could be hiking rates in Dec while the ECB continues with its QE programme.”