Eurozone finance ministers approved the disbursement of the next tranche of Greek bailout funds, to the relief of markets, giving the Euro a boost against its rivals.
However, this positivity was somewhat tempered by the fact that creditors continued to lack any agreement on the subject of debt relief.
This merely kicks the issue of Greek debt sustainability down the road once again, with the matter likely to hang over the appeal of the single currency for some time to come.
As a result EUR exchange rates were in a relatively muted mood on Friday morning, particularly as forecasts pointed towards no change in the finalised Eurozone consumer price index for May.
Even so, despite the odds of the European Central Bank (ECB) remaining on hold for the foreseeable future, the Euro is likely to remain biased to the upside.
With the imminent threat of a fresh Eurozone debt crisis gone the final round of French parliamentary elections will come into increased focus.
President Emmanuel Macron’s fledgling centrist En Marche movement looks set to win a sweeping majority, paving the way for his economic reforms to pass with minimal fuss.
Such a result would encourage greater confidence in the outlook of the wider Eurozone, bolstering the Euro Pound exchange rate.
As Tim Riddell, research analyst at Westpac, noted:
‘Although forward-looking components of this week’s ZEW surveys suggest some moderation, surveys are still punching at six year highs. The lack of ‘new’ key data releases in the coming week suggests that markets will continue to assess the positive trend in Eurozone data since mid-2016 as displayed by industrial production’s gyrating around the latest OECD leading indicators for Eurozone.’
Pound Fails to Hold onto Boost from Unexpectedly Hawkish BoE Meeting
Although the Pound strengthened sharply on the back of an unexpectedly split Bank of England (BoE) policy vote it was not long before it returned to a bearish footing.
While markets were initially encouraged by the suggestion of a greater shift towards hawkishness amongst policymakers the ultimate odds of an interest rate hike remained decidedly limited.
Given that this was the final policy meeting for prominent hawk Kristin Forbes the push for tighter monetary policy seems unlikely to gain any particular momentum in coming months.
Even as inflationary pressure exceeds the BoE’s target range worries over wage growth and the health of the wider economy are likely to keep the Bank on hold.
With formal Brexit negotiations due to get underway on Monday the mood towards the Pound is likely to remain cautious, particularly as the sense of political instability in the UK persists.
Signs that the government is continuing to pursue a hard-line rhetoric on Brexit could leave Sterling vulnerable to further downside pressure.
Current EUR GBP Interbank Exchange Rates
At the time of writing, the Pound Euro exchange rate was trending narrowly at 0.8745. Meanwhile, the Euro Pound exchange rate was on a modest downtrend around 1.1433.