Euro exchange rate today: Bearish views on the EUR will persist on likelihood of ECB easing and political instability

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Category: Exchange Rates

Published on Monday, 18 June 2012 08:46

Written by Sam Coventry

We see the euro dollar exchange rate finds itself virtually unchanged on Friday's closing level at 1.2636 at 9:33 AM in London.

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Of course the big news concerning the euro (Currency:EUR) today is the outcome of the Greek elections, but read on for the other snippets coming out of the Eurozone, including hints that monetary easing at the ECB remains a possibility.

New Democracy has won the Greek general election with the anti-bailout SYRIZA party coming in a close second. The euro took the news positively in Asia once it became clear that New Democracy and PASOK have sufficient numbers combined to form a coalition government



We see the euro dollar exchange rate finds itself virtually unchanged on Friday's closing level at 1.2636 at 9:33 AM in London. (Please see our IMT site for the latest exchange rate forecasts; access is issued free via this Facebook entry page).

The euro pound exchange rate is 0.3 pct up at 0.8065.

"We remain bearish on the euro given the political uncertainty in Greece is not likely to come to an end anytime soon and, as such, questions about Greece’s continued membership of the Eurozone are likely to haunt the currency for many months to come, says Gareth Berry at UBS.

Spain’s Prime Minister Rajoy said Europe needs more political and banking integration and that Spanish banks, businesses and regions are having difficulty financing themselves.

Eurogroup Chair Juncker warned against Greece leaving the euro, saying that if it were to happen “the internal cohesion of the Eurozone would be in danger”.

Former ECB policymaker Bini-Smaghi dismissed the idea that there could be an “orderly” Greek exit from the Eurozone.

ECB President Draghi said there is “no inflation risk in any Euro-area country”.

And in other dovish news Bloomberg reports that a majority of policymakers on the ECB’s Governing Council would not object to cutting the interest rate paid on deposits to below 0.25%, citing two unnamed central bank officials.

The change of heart is seen as paving the way for a cut to the policy rate below 1.00%.

The IMF’s quarterly report on Ireland described Ireland’s plans to start issuing T-bills in the second half of 2012 as “feasible” but said a “substantial improvement” in market conditions would be needed to return to bond markets as planned in 2013.