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The September Euro failed to follow-through to the upside following Friday’s strong positive reversal. Late last week, bullish Euro traders were celebrating a possible resolution to the Greek debt crisis, however, the apparent deal fell apart over the week-end as European leaders sought more austerity measures from the Greek’s before approving any favorable debt deals.
Officials are now pegging a possible fix to the Greek sovereign debt problem to on or about July 11. In the meantime, Greece is expected to show the Euro Zone bigwigs that they have taken positive steps toward cutting spending and raising taxes.
While the Euro Zone nations are talking and acting tough toward Greece, the International Monetary Fund seems poised to release some of the money promised to the struggling nation. Overall, traders feel a resolution will be reached in July, however, market participants are not showing too much of a commitment to the Euro this morning.
Expectations are for the Euro to remain rangebound or show a slight bias to the downside over the near-term until traders have something more solid to base a long position. Once the market can shake this lingering debt issue, traders are looking for the Euro to resume its recent uptrend, fueled by the favorable interest rate differential over the U.S. Dollar.
In other news, the Federal Open Market Committee begins a two-day meeting on Tuesday, June 21. Look for the Fed to leave interest rates unchanged at near zero. In the meantime, the debate will center on whether to stimulate the economy to create jobs and risk a return of inflation or leave the economy alone.
My guess is the FOMC will continue to state that fighting inflation is its biggest concern although its members will acknowledge that weak housing and rising unemployment remain major issues.
Continue to look for volatility in the currency markets as traders digest the news about Greece and react to the potential spread of sovereign debt issues in the Euro Zone.
