The $1 trillion joint European Union and International Monetary Fund bailout package for Greece announced in early May helped support global equity markets but analysts don’t expect it will have a long-term positive impact on the euro currency.
“The currency market has voted pretty clearly to reject the [bailout] program and its rescue package for the euro,” says Brian Dolan, chief currency strategist at Forex.com. “They’re borrowing more to bail out a deficit situation, which does not provide that much of a solution and amounts to a form of quantitative easing, which is typically a currency negative,” he says, adding that there’s a serious risk of a double-dip recession developing in the Eurozone and the UK. He sees strong resistance in the euro at $1.32-$1.33 and expects it to drop to $1.18 by yearend.
“There’s already enough stress on the euro, and when you add the factor of quantitative easing, which is increasing the money supply, it should weaken the currency,” says Dan Cook, senior market analyst at IG Markets. Cook expects a downside target for the euro of $1.18 to $1.20 into June and July. “It’s hard to make any type of case for a recovering euro at this point,” he adds.