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Euro outflows look likely

Greece missed its self-imposed Sunday deadline for reaching an agreement with its lenders for aid, putting pressure on the Euro. The missed deadline led to renewed fears in the market that Greece might default on its debt, or exit the euro zone, reports Reuters.

Greece faces a payment to the International Monetary Fund (IMF) on Friday and the expiration of its bailout program on June 30. Greece’s Syriza party won a decisive political victory in January after running on an anti-austerity platform, putting the new ruling party at odds with Greece’s creditors.

“You’ve got about €260 billion of euro bonds which are going to be redeemed in the coming six or seven weeks,” said Peter Kinsella, a currency strategist at Commerzbank in London, “It’s quite likely that a significant portion of these bonds will not be rolled over… That should keep the euro under pressure.”

Although strategists disagree on the extent to which Greece’s protracted talks with its creditors have impacted the euro, most agree that as the country’s IMF deadline draws closer, Greece’s potential default and exit from the euro zone is weighing more heavily on investors’ minds.

The euro fell 0.7% against a stronger dollar Monday, trading at $1.0926 to the euro, retreating from Friday’s one-week high of $1.1006. The euro also slipped against the yen, falling 0.7% to trade at 135.46 yen to the euro.

“It’s pretty clear that Greece is coming to a head but also the dollar seems to be trading pretty well on the crosses,” said Kinsella. “(But) the bigger story for the euro in June and July is going to be continuing portfolio outflows.”

Euro

Source: Bloomber Euro spot prices against the dollar from May 3, 2015 to June 1, 2015

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