Euro vulnerable to the downside in the near term

The euro has remained remarkably resilient over the past month in the face of the uncertainties surrounding Greece. Peripheral bond spreads outside of Greece have widened limitedly and remain significantly narrower than in 2012. 

The most significant euro area macroeconomic news was the return of headline CPI inflation to positive territory, rising to 0.3% in May, while core inflation gapped higher to a nine-month high of 0.9%. Indeed, inflation expectations on both market and survey-based measures have moved higher since the start of the year. 

"While the euro has been surprisingly resilient, we believe that it has been driven by investor portfolio shifts and, as such, is vulnerable to the downside in the near term. Our EUR/USD forecast for end year is unchanged at 1.07." says Lloyds Bank