The Euro to Pound Sterling (EUR/GBP) exchange rate weakened by more than 0.30% on Wednesday as the UK currency was supported by positive domestic data and by the announcement by the British government that it was drawing up plans to protect the UK economy from a Greek exit from the Eurozone.
The Euro to Pound Sterling (EUR/GBP) exchange rate weakened to a session low of 0.7164
Greece has just thirteen days to reach a deal with its creditors before its current bailout programme ends. If no deal is reached then the nation is expected to default on its €1.6 billion repayment owed to the International Monetary Fund (IMF). With neither Athens nor the creditors backing down on reform measures, the prospect of a deal being reached by the deadline looks unlikely.
In an attempt to end the deadlock, Austrian Chancellor Werner Faymann is heading to Greece. The Chancellor has been a critic of some of the measures being demanded by the creditors of the IMF, European Commission (EC) and European Central Bank (ECB).
‘I know there were a number of proposals, also from the institutions, hat I also don’t find in order. High joblessness, 30-40% with no health insurance and then they demand raising VAT on medicines. People in this difficult situation cannot understand that,’ Faymann said in an interview with an Austrian broadcaster.
Britain Preparing for ‘Grexit’
UK Chancellor George Osborne has confirmed that the British government is making plans to prepare for ‘serious economic risks’ that are likely to result from a Greek default and potential exit from the single currency bloc.
‘Out in the real world there are some economic risks, not least the risk that we see growing in Greece of a potential default and exit from the Euro. People should not underestimate the damage that that would do to financial confidence. Of course, in the UK we take all steps to prepare for and protect ourselves from such eventualities, but the best thing that a government can do is to ensure that it is living within its means, that is had a productive economy and that its public finances are in good order,’ said Osborne in a meeting with Members of Parliament.
UK Data Supports Pound Sterling (GBP) Exchange Rate
After the release of unemployment and average earnings data the Pound advanced against the Euro and other major peers.
The nation’s unemployment rate was shown to have stayed at 5.5% in April, but average earnings increased more than forecast.
The minutes of the Bank of England’s June 3 monetary policy committee meeting showed that all nine members voted in favour of leaving interest rates at the record low level of 0.5%.
The Euro could make further losses against the Pound on Thursday if the latest UK retail sales data comes in better-than-forecast for May.