Euro Moderately Higher ahead of Greece Referendum


The euro traded slightly higher against its US and British counterparts on Friday, as investors responded positively to upbeat Eurozone data ahead of Sunday’s Greek referendum on whether to accept the troika’s latest bailout terms.

The euro was moderately supported against the US dollar. The EUR/USD held on to 1.1100 in Europe’s late afternoon session, up 0.1%. The pair had reached an intraday high of 1.1121. Initial support is likely found at 1.1082. On the upside, initial resistance is likely found at 1.1130. Trade volumes for the EUR/USD were relatively light as the US markets closed to observe Independence Day.

The euro also advanced against the British pound, as investors continued to price a Bank of England rate hike for May 2016. The EUR/GBP was trading near session highs at 0.7112, up 0.1%. Key levels for the EUR/GBP included 0.7075 on the downside and 0.7126 on the upside.

In economic data, Eurozone PMI rose faster than forecast in June, signaling that the European Central Bank’s bond-buying program was reenergizing the regional economy. Markit’s Eurozone composite PMI, which monitors the performance of the manufacturing and services sectors, rose to 54.2 in June from 53.6 in May.

The PMI data suggest Eurozone GDP expanded 0.4% in the second quarter after rising at a similar rate in the first three months of the year.

“The combination of ECB stimulus and low inflation appears to be boosting spending among consumers and businesses, offsetting ‘Grexit’ anxiety,” said Markit chief economist Chris Williamson in a press release.

Grexit fears could reach a boiling point on Sunday when Greeks vote on whether to accept creditors’ latest reform plan. Greek officials are encouraging citizens to vote “No” on the latest plan. According to European Union officials, a No vote would be equivalent to exiting the euro.

The euro could face significant volatility early next week as investors react to the referendum. The EU has ruled out talks with Greece until after the Sunday plebiscite.

Greece needs up to €60 billion in funds and debt relief over the next three years in order to create “a breathing space,” according to the International Monetary Fund (IMF). The international lending institution also said Greece should have a 20-year grace period before making debt payments.