Euro inches up as Varoufakis plays down fears of default

Euro inches up as Varoufakis plays down fears of default fxcommentThe euro has found some relief on Wednesday, yet still trades near one-month low versus the U.S. dollar, after Greek Finance Minister said his country would repay its next IMF payment.

Greek Finance Minister Yanis Varoufakis said late Tuesday that Athens will be able to repay a 300 million euros interest payments to the IMF on June 5, because a deal will have reached with creditors by then. Greek officials will resume talks in Brussels on Wednesday.

The words of Varoufakis provided some confidence that Greece would not default on the IMF payment, and would pay public sector salaries, pensions and other debt obligations.

Reaching an agreement means Greece would release an aid disbursement of 7.2 billion euros, taking into consideration that the June 5 payment should followed by another three loan instalments totaling 1.6 billion euros due to the IMF next month.

The announcement gave the euro some ground against the U.S. dollar, reminding that the euro was boosted by the previous 750 million euros interest payment to the IMF by Greece.

With the absence of economic data this week from the eurozone, the key focus will remain on Greece to see whether the Hellenic country would reach an agreement before the end of this month.

The EURUSD is currently trading around 1.0880 after visiting a low of 1.0860.

The pair has found some support as it approached the 61.8% Fibo support level to the upside wave that began by mid-March.

EURUSD fxcomment May 27

It is clear that the drop in the euro is very sharp, as a 5.5-percent gain generated over course of nine weeks has been followed by a 5.0-percent loss in less than two weeks.

This could indicate a shift in the market sentiment towards the dollar after the rise in U.S. inflation and on dovish comments from fed Chair on Friday.

If the economy continues to show progress, which is expected, “it will be appropriate at some point this year” to start raising interest rates, Fed Chair Janet Yellen said.

For knowing the key reasons behind the drop in the euro please check: Will The Euro Halt Its Rally?

Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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