EUR/USD: What is main driver of the pair? Hint, it's not Greece (SocGen bank)

"You could be forgiven for thinking that the biggest driver of the EUR/USD isn't Greece, but the evolution of futures prices backed by the Fed's rates. We are at the lowest level since mid-May.

Anything other than a complete failure of talks with Greece today will cause us to look closely at the evolution of short-term US borrowing rates as the main driver of forex.

Looking at the evolution of futures prices, it appears that the markets expect a 1% increase in key rates over the next 18 months.

All of this suggests that the dollar will strengthen again once the markets integrate the expectation of a faster pace of key rates into pricing. But this requires a catalyst that can only come from important data. Meanwhile, we believe that the hopes of a deal with Greece will weigh down on the dollar early this week.