EUR/USD continues to grind higher as Greece continues to dominate the headlines.
"The main focus was the June Fed meeting where early year expectations of a hike this month now feel a long time ago. There was speculation that Yellen shifted her 2015 dot lower, although as our US economist noted it is hard to tell. With the Fed still in data-dependent mode, more convincing evidence of a Q2 growth pick-up is needed. This week’s May durable goods orders and PCE are the next big data," DB argues.
"In any case, the median FOMC forecast for 2015 remained at 0.625%,
while forecasts for 2016 and 2017 fell 25 basis points...Alan Ruskin
looked into what current forward rates imply for EUR/USD based on the
past relationship of the cross to rate spreads. A
Fed funds rate of 275bp versus a zero EUR overnight rate would imply a
further 20 big figure move lower in the cross. Clearly, however, the
burden of EUR/USD weakness now lies on the Fed. With the Fed still in data-dependent mode, more convincing evidence of a Q2 growth pick-up is needed," DB adds.
