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EURUSD Little Changed Ahead of Eurogroup Meeting

H.S. Borji
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The euro held its ground against the US dollar on Wednesday, as the markets traded sideways ahead of a key Eurogroup meeting headlined by Greece bailout talks.

The EURUSD traded within a narrow range, bottoming out at 1.1290 before consolidating at 1.1312, little changed from its previous close of 1.1316. The pair is likely to find support at 1.1277, the low from Tuesday. Resistance is ascending from 1.1351.

Eurozone finance ministers will coalesce in Brussels later today to discuss Greece’s bailout program. Greece’s newly elected government, a far-left coalition that ran on the platform of “anti-austerity,” has vowed not to extend the country’s bailout program beyond February. The bailout provided Greece with $270 billion to avoid bankruptcy in exchange for sweeping reforms. Those reforms have been described as “cruel” austerity by Greece’s newly appointed Prime Minister, who only last week ruled out any extension of the current bailout package, putting his country on a collision course with the rest of the currency bloc.

It is unlikely that other member states would like to see Greece exit from the fledgling currency union, suggesting that policymakers may reach a short-term deal to address the Hellenic Republic’s political realities. Long-term, however, the troika is unlikely to bend to Greece’s demands. Earlier this week German finance minister Wolfgang Scheuble reiterated that the European Central Bank would not negotiate a new debt pact.

Greece’s finance minister Yanis Varoufakis is expected to unveil a “bridge program” to cover his government’s funding needs amid negotiations for a new debt agreement. He is also expected to propose new reforms that the current Greek government would like to scrap.

The European Commission has low expectations that any final agreement will be reached this week, according to the organization’s spokeswoman Mina Andreeva.

“We have low expectations that any final agreement will be reached tomorrow or at the European Council,” she said on Tuesday. However, she also stated that an agreement could be reached before the Eurogroup’s next meeting scheduled for February 16.

The euro will probably remain under pressure for much of the week, as investors continue to speculate about Greece while paying attention to escalating violence in Ukraine. More than 20 people have died in the eastern part of the country, including 19 Ukrainian soldiers, in a fresh wave of violence. Leaders of Russia, Ukraine, France and Germany are preparing for new peace talks in an attempt to end the nearly year-long conflict that has resulted in the death of 5,400 people, including more than 250 civilians between January 31 and February 5.

In economic data, Germany will release its final January inflation numbers on Thursday. The European Commission’s statistics branch will also report on Eurozone industrial production in December. Germany will then close out the week with a preliminary estimate of fourth quarter GDP growth. The German economy is forecast to grow 0.3 percent in the fourth quarter and 1 percent annually, according to a median estimate of economists.

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