The first quarter of 2015 has ended terribly bad for the euro dollar pair which has lost nearly 25% of its value. Thanks to the ECB quantitative easing program and the strength of the U.S. dollar. If Mr Draghi has achieved anything for sure, it is certainly the weakness in the euro against all the major currency. Even novice traders have been able to make profit on this trade, as the only affair they need to worry was to press the sell button on their platform and let the ECB take care of the rest. As a currency trader, a 25% gain is sturdy and it is something you will roar if you are a hedge fund, but in this instance, it is only driven by the strategies of the ECB and the poor growth conditions in the eurozone.
Having said that, the Eurozone’s equation looks a lot more in a healthier shape as compared to previous quarter, because the ECB QE has changed the face of confidence in the eurozone and the economic data through out this quarter since the announcement of this strategy has proven to be much more promising than anyone could have asked for. So, does this mean that we are out of woods completely and plain and smooth sailing is ahead of us? Of course not, the water is still rough and there is no plain sailing especially, when it comes to the euro. For instance, Greece has confirmed that it has a season ticket to stay in the headlines and without any doubt, the number of headlines printed about the country must be equal if not more as compared to the crisis of a few years ago.
Although, Tsipras party is trying to back paddle and renovate their promises which they made during the election campaign, a typical politician act, but if victory is going to welcome them, is still a question. The credit lenders have played the same beat when it comes to reform structure for Greece, and given that the country has not produced anything which makes sense in more practical way, it is hard to imagine this film will have happy ending unless we move softness from the lenders.
With every minute passed, Greece has less time to put its act together as the country is running out of options to keep its system float and will soon have no more money. Questions are still being asked till this day, if the Eurozone is better without Greece and if the headwind will ease off? Or if the officials will kick them out? But given that it is the will of Greeks to stay in the Eurozone, we believe and maintain our view that the happy ending is still on the cards for Greece.
The next catalyst for the currency is the upcoming ECB minutes which are due tomorrow. We do know that Mr Draghi is determined to buy the government bonds even though they could have negative yield, of course within some limits, but it the power of his determination or shall we say “whatever it takes” that could put further downward pressure for the currency in the coming days.