Euro Weakens As Greece Negotiations Fail

European stock markets are expected to open weak as the Greek crisis deepens. Last-ditch negotiations will resume on Saturday and will hopefully avert a Greek default and possible exit from the common currency. At any rate, European finance ministers are preparing for a scenario in which the Eurozone must be protected from financial turmoil if the Greek government fails to repay $1.79 billion next Tuesday. Talks broke down on Thursday, showing that neither side may be willing to compromise. In any case, both the Greek and German parliaments must accept the agreement before it is signed, adding another layer of resistance leaders must overcome. A ‘Grexit’, a scenario in which Greek exits the Eurozone may be inevitable if Athens and their creditors fail to find a solution in the coming five days. Yesterday European stock markets showed mixed results, reflecting the market’s reactivity to the ongoing drama. The UK’s FTSE fell 0.3% as the financial and healthcare sectors came under pressure. The German DAX declined 0.1% as major components such as Merck (NYSE:MRK) and Siemens AG (XETRA:SIEGn) NA (LONDON:0P6M) show the weakest performance with a 0.4% decline. The French CAC was lower by 0.2% as major consumer names decline. The Italian MIB outperformed its European counterparts with 0.8% increase for the day as shares in the financial sector gain up to 4.8%.

In Currencies, the euro slightly weakened against the dollar, falling 0.1% to trade 1.1188. The EUR/USD has been stuck in a tight range for the third consecutive session, reflecting the fundamentally-led markets. So far, the euro is down 1.4% for the week. The U.S. dollar slightly weakened against the yen, falling 0.2% to trade at 123.33. As Greece claims the majority of the spotlight, positive U.S. economic data could have propelled the dollar by reaffirming the Federal Reserve’s data-dependent position on an interest rate increase. Data released on Thursday have shown that U.S. consumer spending grew at its fastest pace in nearly 6 years. As it currently stands, analysts expect that Federal Reserve will increase borrowing costs in a gradual process that will begin towards the end of the year.

Crude oil declined 1% on Thursday, falling below $60 per barrel, but has since gained 0.13% to trade at $59.71. Crude oil has been trading within a relatively tight range as it faces pressure from a larger-than-expected growth in gasoline stockpiles last week despite an overall decline in crude production. The possible nuclear deal with Iran has major consequences for the oil market. If the deal is signed, it is expected that Iran will begin to sell oil in large volumes, a move that may worsen the already-oversupplied market.

Next week will offer some interesting data releases. German inflation data is scheduled to release on Monday, shortly followed by U.S. housing data. UK and Canadian GDP data is scheduled to release on Tuesday. However, all eyes are set on Thursday’s U.S. nonfarm payroll report, detailing the number of jobs added to the U.S. market.