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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Decline Next Week, ‘Grexit’ Concerns Dominate Movement

The Euro to Pound Sterling (EUR/GBP) exchange rate weakened this week and more losses are forecast over the coming week as market attention continues to worry that Greece is heading towards an exit from the Eurozone.

The Euro to Pound Sterling (EUR/GBP) Exchange Rate Fell To a Weekly Low of 0.7170

There was little in the way of market moving data releases on Monday but despite that, the Euro softened against the Pound and other major peers. The cause of the single currency’s dip was mounting concerns that a deal between Greece and its creditors will not be achieved by April 24.

On Tuesday, the Euro managed to regain some ground against the Pound and other peers after data released in the UK showed that the nation’s inflation rate remained at 0%. The figure means that inflation in the UK is now at its weakest level since records began in 1989.

Supporting the single currency was data released by Eurostat, which showed that industrial production across the currency bloc increased by 1.6% on a year-on-year basis and by 1.1% on a month-on-month basis.

Midweek, the Euro gave up its previous gains as the European Central Bank left interest rates unchanged at the record low level of 0.05%. The ECB press conference, that followed the rate announcement offered little in the way of new information but was briefly interrupted by an anti-ECB protestor leaping onto ECB President Mario Draghi’s desk and chucking confetti at him.

On Friday, the Euro declined further as the Pound Sterling was buoyed by the release of positive employment data. According to the Office for National Statistics, the number of Brits in work increased by 248,000, the biggest rise recorded since April 2014. The increase in jobs meant that the overall unemployment rate fell from 5.7% to 5.6%.

The Euro failed to regain ground despite data showing that consumer price inflation in the Eurozone rose by 1.1% last month. The figure was in line with forecasts but up from a preliminary figure of 0.6%.

Greece Forecast to Dominate Sentiment Next Week

Athens is running out of both time and money. If no deal is reached next week then there is a very real chance that the nation will default on its loans.

Greece has to pay off €80 million to the ECB on April 20th and pay off €200 million to the International Monetary Fund (IMF) on May 1st.

‘Even if Greece grows at 10% per annum for the next ten years, it will not be able to pay its debt back. It’s bankrupt. We better face the reality and not kick the can down the road. Greece should default,’ said investor March Faber.

Some investors are betting that the EU will have to blink first as Europe and NATO will not want Greece to exit the Eurozone and possibly move closer to Russia and China.

On Friday, European Commissioner Pierre Moscovici challenged Greece; you must produce a concrete set of reforms by May 11.

One thing is certain; D-day is rapidly approaching for Athens and the Eurozone. 

The Euro is also likely to come under pressure from comments made by European Union officials. With Greece’s deadline fast approaching, ministers will likely deliver quotes to the media. Negative ones will raise concerns over a ‘Grexit’.

The situation in Ukraine could influence the currency pair if the tentative ceasefire breaks.

If UK retail sales disappoint, the Pound will soften.