Will Greece Require a Third Bailout Deal? Euro (EUR) Exchange Rate Ticks Lower despite positive German Sales
The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.18% on Tuesday morning.
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The Euro to US Dollar (EUR/USD) exchange rate was trending within a narrow range.
Despite the fact that European economic data printed positively on Tuesday, the shared currency edged lower versus most of its major peers. The declination can be linked to comments made by European Commission Vice President Valdis Dombrovskis, who warned that once their current bailout program has expired, Greek will likely require an additional bailout deal.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7265.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1166.
Euro (EUR) Exchange Rate softens on Dombrovskis Comments
German sales data printed positively on Tuesday, which helped the common currency avoid a larger declination. The data has been less impactful in provoking upward movement, however. German Retail Sales was forecast to show annual growth of 3.0% in January, down from the previous figure of 4.8%. However, the actual result bettered both the median market forecast and previous figure, resulting in sales growth of 5.3%.
‘Cheap oil, healthy income gains, low interest rates and fading risks combined to make a very strong start to the year for German retailers,’ said Christian Schulz, senior economist at Berenberg Bank. ‘Private consumption looks set to be a major growth driver in 2015 and, at this rate, would put a severe upside risk to our forecast of gross domestic product (GDP) growth of merely 0.3 percent quarter-on-quarter in Q1,’ he added.
However, as described above, this data has had little impact on the single currency after European Commission Vice President Valdis Dombrovskis suggested that Greece’s debt repayment issues were far from over. Dombrovskis suggested that once Greece’s current bailout deal has expired, they will require a third extension programme in June because markets may still not be in a position to lend to the government.
‘Greece may need an additional arrangement after this program expires,’ said Dombrovskis, whose portfolio includes the Euro and monetary union. ‘If we see that the negotiations, as regards the completion of the current program, are moving forward successfully and actually Greece is sticking with its commitments and implementing the necessary reforms, I think it will also be easier to negotiate the next possible package,’ Dombrovskis added. ‘It also will be easier for Greece to return to market financing.’
Euro (EUR) Exchange Rate Forecast to Hold Losses
Given that the shared currency strengthened considerably once Greece’s bailout extension was granted, news that further bailouts may be required is likely to weigh particularly heavily on the common currency.
Wednesday’s Eurozone retail sales data is likely to provoke volatility for the single currency. On a yearly basis, January’s Eurozone Retail Sales are forecast to grow by 2.3%; down from the previous figure of 2.8%.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7256 and 0.7290.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.1152 and 1.1212.