The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.27% on Friday afternoon.
After talks between Greece and Eurozone officials failed to find a resolution to Greece’s debt crisis, the Euro softened versus many of its peers. A brief appreciation, following news that the European Central Bank (ECB) gave Greek banks emergency liquidity, was short-lived after news broke that Greek Prime Minister Alexis Tsipras made a speech in Russia which openly challenged Europe’s ‘obsession’ with austerity.
The Pound Sterling, meanwhile, advanced in response to falling public sector borrowing. With recent ecostats showing wage growth acceleration and a return to inflation, many analysts are now predicting that the Bank of England (BoE) will hike the benchmark interest rate before 2016.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7142.
Euro (EUR) Exchange Rate Forecast to Soften against the British Asset as Greek Woes Highlight European Division
For many, the Euro experiment has failed. The idea of bringing peace between nations under a single currency has been proven unrealistic, with European divides widening as Greek debt levels reach crisis point. 5-months of talks between the European Commission and Greek officials have not seen any progress, with Greek anti-austerity politics proving contrary to Eurozone ideals. The big problem is that Greece cannot impose any more measures on citizens already crippled by austerity, and European officials can’t be seen to concede to the Hellenic nation lest other struggling countries follow suit.
The Euro depreciated further on Friday in response to the news that Tsipras openly criticised Europe in a speech in Russia. Tsipras said: ‘As all of you are aware, we are at the moment at the centre of a storm of a whirlpool, but we live near the sea so we’re not scared of the sea. We are ready to go to new seas to reach new safe ports. The problem we are facing is deeply rooted in the process I have described. The EU should pursue its own path. The EU should go back to its initial principals of solidarity and social justice. Ensuring strict economic measures will lead us nowhere. The so-called problem of Greece is the problem of the whole European Union.’
This suggests that Greece will not remain part of the Eurozone, choosing rather to bed with Russia. Should this be the case, it will certainly call into question the philosophy that a shared currency within a common union leads to harmony amongst idiosyncratic nations.
The Euro to Pound Sterling (EUR/GBP) exchange rate dropped to a low of 0.7124 today.
Pound Sterling (GBP) Exchange Rate Forecast to Strengthen against the Euro (EUR) on BoE Interest Rate Bets
British economic data has printed comparatively positively this week, causing the Pound to advance versus its currency rivals. Of particular importance were reports showing accelerated wage growth and the UK moving away from deflation into inflation territory, with annual CPI at 0.1%. This combination caused futures traders to bring forward bets as to the timing of a BoE benchmark rate hike. Many analysts now forecast that the BoE and the Federal Reserve will lift rates at a similar time.
Friday has seen the Pound edge higher after public borrowing declined. ‘In May 2015, public sector net borrowing excluding public sector banks (PSNB ex) was £10.1 billion; a decrease of £2.2 billion, or 18.0% compared with May 2014. This decrease in net borrowing was largely due to a decrease of £1.6 billion in central government net borrowing, combined with a decrease of £0.6 billion in local government net borrowing. Central government receipts in May 2015 were £45.0 billion, an increase of £1.8 billion, or 4.1% compared with May 2014,’ stated the Office for National Statistics (ONS).
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Trend Lower as Traders Digest Potential Greece and Russian Partnership
The ramifications of Greece getting into bed with Russia could be very serious and are likely to weigh on investor confidence. Therefore, the Euro to Pound Sterling (EUR/GBP) exchange rate should continue to trend lower for the remainder of Friday’s European session.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7164 today.