The most surprising event on Monday (2/6) was EUR/USD's 2 percent jump in the strongest rally this year for the pair. However, the trend that is driven by weaker US data and stronger Eurozone records compared to expectation, is not expected to survive for long.

The most surprising event on Monday (1/6) was EUR/USD's 2 percent jump in the strongest rally this year for the pair. However, the trend that is driven by weaker US data and stronger Eurozone records compared to expectation, is not expected to survive for long.

Euro



Agreement Before Deadline

According to latest news, European Union and IMF officials have contended on the reformations that Greece will have to undertake in order to receive further bailout funds. The proposal has been submitted for Greece agreement, with European officials called it as a take it or leave it deal. However, Greece leader Alexis Tsipras stated that The discussion are going to continue in the coming days, --an indication that Greece will not so easily give in to their creditors' demands, especially since they have compiled their own proposal. 

The good news here is that European Central Bank President, Mario Draghi, have hinted at concessions for Greece in his speech yesterday (3/6). As the one who have been supporting Greek banks liquidity through ELA, their stand can influence Greece's bargaining position substantially, particularly if both insist on each own proposal.

This month is particularly important for the Greece debt discussion, because the amount of payment that has to be paid in the next three months are notably huge and Athena most likely has no sufficient funds to cover them. There are four payments to IMF scheduled in June alone, that is in June 5, 12, 16, and 19. This is just a fraction of around 20 billion Euros of bailout debt that has to be paid by the country in the next nine years. It was predicted that they still can scrap some fund to pay in June 5, but not more than that. Consequently, Euro can climb higher if agreement is reached befor the June 5 deadline; but if there are no such thing till near the 19th, Euro may crumble. 

 Utang

 

Coeure Leaks

Two weeks ago, no one guessed that a college event will be used by Benoit Coeure to drop hints by saying that ECB will loosen its purse strings again either by cutting rates or increasing stimulus. At that time the ECB vice president comment sent Euro down in an instant. Not only Coeure, another member of ECB governing council, Christian Noyer, also said that ECB is ready to widen stimulus in order to take care of weaknesses in the Eurozone economy. Nevertheless, Draghi stated that Eurozone recovery is on the right track, though they are ready to do more if needed.

On another note, inflation in the area has gone up last month on account of pricier oil, and is not expected to survive if oil price drop again. If that's happen, Euro may weaken against Dollar in the next few months. US economy is expected to improve as Fed chief have expressed her confidence that rate hike may occur within 2015.

 

Expectation On Improved US Economy

As the winter that has been blamed for weak first quarter performance ended, many wish for improved US data to support US Dollar recovery. Optimism has coloured FOMC The Fed members speechec as of late, and even the dovish chief, Janet Yellen, publicly expressed her confidence in the possibility of 2015 Fed rate hike. The rate hike that is surely going to push Dollar higher may in contrary drag the Euro down as the gap between two central banks' policy directions widen.

Scores of highly influential reports are scheduled to be published in the US till the end of this week and may trigger correction in Euro rally. Among them is Nonfarm Payrolls (NFP) that regularly out in the first Friday of the month. Before that, there has been ISM Non-Manufacturing PMI, ADP Nonfarm Employment Change, and US trade balance for May 2015. For the time being, drops in ISM, ADP, and trade balance data has pushed the USD lower against major currencies including Euro. Still, it means there is chance to sell the Euro from higher levels and gain profit from it if NFP later turn out higher than expected. In fact, there are even some who thinks that USD may gain as long as NFP comes higher than 200k.