The Euro to US Dollar (EUR/USD) exchange rate firmed but remains close to an 11-year low as a mixed bag of data from the US and easing rhetoric from the Greek Syriza party supported the single currency against the ‘Greenback’.
Syriza Comments Ease Fears
Concerns that a Greek general election victory for the left wing Syriza party would lead to a possible ‘Grexit’ from the Eurozone were eased on Wednesday after party leader Alexis Tspiras took measures to ease the markets.
‘A Syriza government will respect Greece’s obligation, as a Eurozone member, to maintain a balanced budget, and will commit to quantitative targets. If the Greek people entrust us with their votes, implementing our economic programme will not be a ‘unilateral’ act, but a democratic obligation. We must end austerity so as not to let fear kill democracy.’ said Tspiras in an article written for the Financial Times.
With the election just four days away, the markets are jittery over the outcome. Syriza has so far been shown to be leading most opinion polls and has a very good chance of winning. Current Prime Minister Antonis Samaras has warned that a win for Syriza would put Greece’s position in the Eurozone in jeopardy.
ECB Meeting in Focus
Also supporting the Euro are expectations that the European Central Bank will introduce a quantitative easing programme during Thursday’s policy meeting. Economists have factored such a move and are expecting the ECB to unveil a sovereign bond-buying programme worth €500 – 600 billion. Expectations for the introduction of such a policy are now seen as positive as it is hoped that the measures will help the bank tackle the threats posed by deflation and weak economic growth.
If, however, the ECB takes the markets by surprise and goes a step further by either introducing a larger programme or introducing even more policy measures we could see the single currency plummet against the US Dollar.
‘If we see a real policy of shock and awe being conducted from the ECB, then easily we could find ourselves sub (USD/EUR) $1.10 or looking at $1.08 relatively quickly, and if that happens, clearly the parity threshold would be discussed widely,’ said Jeremy Stretch, market strategist from CIBC.
Mixed US Data weighs on USD
The US Dollar meanwhile was softened by the release of mixed domestic data.
According to the Washington based Commerce Department the number of building permits issued in December fell by 1.9%, separately the number of new housing starts rose more than forecast by 4.4%.
Euro Exchange Rates:
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