EUR/USD has rebounded over 70 pips from a two-day low at 1.0667 in reaching 1.0740 as the Grexit risk premium unwound some after a Greek government official said they are expecting a positive signal from the Eurogroup meeting in Riga tomorrow. This comes despite a downgrade in EU PMI’s. Support is seen near the 10-day moving average at 1.0720.
A Greek government official said Greece expects a positive signal from the Eurogroup meeting in Riga, adding that a deal is close and that PM Tsipras will tell German Chancellor Merkel that Greece has kept its promises. While creditor officials urge more progress in the talks, Greek officials continue to remain defiant, saying that Greece has walked 70% of the distance and the remaining 30% will have to be covered by both sides, so they can meet half way. Creditors meanwhile seem to have already given up on the April deadline and are concentrating on June instead, although without a further aid payout it is doubtful whether Greece can hold out that long.
Eurozone PMIs head south in April, with the overall manufacturing reading falling to 51.9 from 52.2 and the services reading to 53.7 from 54.2, which brought the composite down to 53.5 from 54.0. Indicators still point to healthy expansion, in line with expectations of gradually strengthening growth, but the unexpected dip, which reflects declines across the board in Germany and France and ties in with the decline in the German ZEW reading, highlights that there are still risks to the recovery. The ECB will see this as justification for its QE program and the very expansionary policy.
French manufacturing confidence dropped to just 48.4 from 48.8, indicating and acceleration in the pace of contraction, while the services indicator fell to 50.8 from 52.4. The German manufacturing number dropped to 51.9 from 52.8 and the services reading to 54.4 from 55.4.
Euro Jumps as Grexit Risk Abates