EUR/USD: Easing Greek and Fiscal Cliff Worries Help the Euro

The previous European trading session ended unfavorably to the Euro as it lost 70 pips versus the US dollar on persisting worries over Greece and the US fiscal cliff. In today's European session, the EUR/USD pair is likely to take on a bullish direction as the European leaders are set to meet today to discuss the Greek issues at hand, and on signs that the US leaders are willing to come to an agreement to avoid the fiscal cliff.

Last week, the European officials decided to keep funds flowing into Greece, however, talks this week are likely to be tough, considering the opposing views of the Eurogroup and the International Monetary Fund over the target for Greece to reduce its debt, thus, gains of the Euro could somewhat be limited. Eurogroup head Jean-Claude Juncker believes that 2022 would be an appropriate target for Greece to cut down on its debts but IMF Managing Director Christine Lagarde believes otherwise. Lagarde sticks with the 2020 target and said that Greece's program to be sustainable, should be rooted in reality and not in wishful thinking. Despite the emerging conflicts, the European leaders are said to fill the gap so as not to delay the approval of new aid for Greece. Given optimism that the Greek-aid decision would be reached, the Euro is likely to find support.

Meanwhile, the Greenback is seen to fall on easing worries about the fiscal cliff. During the weekend, the Democrats and the Republicans signaled their willingness to make a compromise so as to avoid the automatic imposition of taxes and government cuts despite facing a tough road ahead, resulting to improved market sentiment towards the global economy. With expectations that better results would be reached out of the Greek-aid and fiscal cliff discussions, the single currency is expected to rise, making buy a recommended position for the EUR/USD pair in today’s European trades.

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