The Euro to Pound Sterling (EUR/GBP) exchange rate softened by around -0.27% on Tuesday morning.
With risk sentiment already dampened as the situation in Ukraine bubbles, the shared currency has found little support as traders speculate as to the likelihood of a Greek exit from the Eurozone. With Greek and German officials unable to find a compromise, many fear that a Grexit is an inevitability.
The Pound, conversely, has gained versus the majority of its most traded currency rivals on Tuesday morning. This is as a result of British data either bettering previous figures or eclipsing estimates. Gains are unlikely to be substantial, however, with Grexit fears also weighing on demand for the British asset.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7423.
Euro (EUR) Exchange Rate Dips on Geopolitical Pressures
As described above, many traders are speculating that Greece will soon leave the Eurozone. Little is known about the true extent of the damage that could be caused by such a move, although most agree that it would be devastating.
‘Without a programme, things will be tough for Greece. I wouldn’t know how financial markets will handle it without a programme — but maybe he knows better,’ German Finance Minister Wolfgang Schaeuble told reporters at a G20 meeting in Istanbul, referring to Greece’s Prime Minister Tsipras.
Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006, said: ‘I believe [Greece] will eventually leave. I don’t think it helps them or the rest of the Eurozone – it is just a matter of time before everyone recognises that parting is the best strategy. The problem is that there is no way that I can conceive of the Euro of continuing, unless and until all of the members of Eurozone become politically integrated – actually even just fiscally integrated won’t do it.’
The Euro to Pound Sterling (EUR/GBP) exchange rate has dropped to a low today of 0.7413.
Pound Sterling (GBP) Exchange Rate Gains on UK Data
British data printed relatively positively on Tuesday, allowing the Pound to advance versus the majority of its most traded currency rivals.
Year-on-year Industrial Production declined from the previous figure of 1.1%, but equalled the market consensus of 0.5%. Similarly, Yearly Manufacturing Production softened from the previous figure of 3.0%, but bettered the median market forecast of a drop to 2.0% with the actual result reaching 2.4%.
In addition to data promoting a Sterling advance, Prime Minister David Cameron’s active stance in making preparations to protect the UK against a Greek exit has boosted sentiment towards the British asset.
‘It is a rising threat to the British economy. And we have got to make sure that in Europe, as in Britain, we choose competence over chaos,’ Chancellor George Osborne said after his talks with Varoufakis in London.
Euro to Pond Sterling (EUR/GBP) Exchange Rate Forecast to Hold Losses
Given that the odds of a Grexit is rising rapidly, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to hold losses for the remainder of Tuesday. With that being said, there is the possibility for Sterling volatility with the publication of Gross Domestic Product estimate due later on Tuesday afternoon.
Wednesday is likely to be a continuation of geopolitically focussed trading with a complete absence of European data to provoke changes for the common currency.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high today of 0.7446.