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EUR GBP Exchange Rate Weakens; ESM Head Criticises IMF Conclusions on Greek Debt

Further complications regarding the Greek bailout have failed to undermine the EUR GBP exchange rate today.

Closing Update, 9th Feb; The head of the European Stability Mechanism (ISM), the bailout fund involved in the Greek rescue, had also hit out at the IMF today. In response to the Fund’s claims that Greece’s debt levels are unsustainable, Klaus Regling stated;

A sober look at the facts shows that Greece’s debt situation does not have to be cause for alarm. The European Financial Stability Facility and the European Stability Mechanism, the Eurozone’s rescue funds, have disbursed €174bn to Greece. We would not have lent this amount if we did not think we would get our money back…

Afternoon Update, 9th Feb; The Greek government will be under further pressure not to budge in today’s meeting with Eurogroup creditors; the nation’s farmers have upped their protests against the current austerity measures. Farmers and stockbreeders have blockaded a customs post on the border with Albania. Agricultural taxes are set to double to 26%, while pension cuts could total -60% by 2020.

Midday Update, 9th Feb; It seems that no one in the Greek debt debate has any intention of budging. Tough-talking German Finance Minister Wolfgang Schaeuble has commented that debt forgiveness, such as the IMF is demanding, would go against the rules set out in the Lisbon Treaty. The only way Greece can get debt relief from its Eurozone creditors is if it were to leave the currency bloc, he stated.

Morning Update, 9th Feb; Eurogroup Working Group meets today to try and break the deadlock surrounding the Greek bailout. If this meeting fails to see progress, the knock-on effect will likely be that finance ministers won’t be in a position to make a deal when they next meet on 20th February. A crucial review into the bailout needs to take place first, but has been held up by the current stalemate.


IMF Board Split Slows EUR GBP Exchange Rate Gains; Fears Build Over Greek Bailout Review

The International Monetary Fund (IMF) has revealed that not all of its directors support the Fund’s overall position on the Greek bailout. The IMF and Eurogroup creditors have been at loggerheads for a considerable amount of time over the targets Greece must reach under the terms of the bailout.

Eurogroup wants Greece to run a fiscal surplus equivalent to 3.5% of GDP as a condition for the new bailout set to start in mid-2018. However, the IMF has long claimed this target is too extreme, instead calling for the target to be set at 1.5%.

However, its position has not been popular; the smaller surplus requirement would mean creditors would have to grant considerable debt relief to Greece in order to lower its debt burden.

Eurogroup creditors, in particular Germany, are strongly against this, instead arguing for the higher target.

The IMF has not participated in the current bailout, but its involvement is largely considered necessary for the fourth round set for next year. However, neither party has been willing to budge on the key issues.

The issue has become even more complicated now that the Fund has revealed not all of its 24 directors agree with its position that a 1.5% surplus target is required. An unspecified number agree that Eurogroup’s 3.5% target is achievable. This has added further bumps in the road for the Greek bailout, with a failure to agree a deal likely to see the stricken Hellenic nation crash out of the Eurozone.

Nonetheless, EUR GBP has been able to shake off these fears to some extent, notching up minor gains.

Pound Weakens as Labour’s Initial Article 50 Bill Amendments are Defeated

Despite the concerns plaguing the common currency, EUR GBP is on the rise. Pound Sterling has been unseated by news that Labour’s attempts to amend the Article 50 bill before it gets passed to the House of Lords have been defeated.

Motions included requiring the government to report back to Parliament every two months on the progress made in negotiations and that leaders of devolved governments would be consulted on the final Brexit deal.

There is still time to secure other amendments to the bill, such as those guaranteeing the rights of EU nationals who are already living in the UK. However, the fact that the first round of amendments were clearly defeated has unsettled investors, who are worried Theresa May could end up with a blank cheque going into negotiations.

Data has also undermined support for the Pound. The British Retail Consortium (BRC) like-for-like sales data for January has revealed a surprise contraction in sales. December’s 1% pace of growth was expected to have weakened just ten basis points, but instead slumped to -0.6%.

House price data has also disappointed, with prices falling -0.9% on the month instead of stagnating and the three months to January seeing growth of 5.7% against predictions of 6%.

EUR GBP Exchange Rate Forecast; Sparse Data Calendar until Thursday to Leave Sentiment in Control

There is no notable Eurozone or UK data due for the rest of today, with tomorrow’s speech from Bank of England (BoE) official Jon Cunliffe the only development of note.

This means market sentiment is likely to remain the key driver of the EUR GBP exchange rate. Considering Greece and Brexit are weighing heavily on the two currencies, the Euro Pound pairing could see lacklustre movement until Thursday’s data releases finally provide a stronger direction.

Interbank EUR GBP Exchange Rates

At the time of writing, the EUR GBP exchange rate was trading around 0.86, while the GBP EUR exchange rate was trending around 1.15.