- EUR GBP Still Feeling Pressure from Greece – Greek debt crisis unlikely to solved in the near-future.
- Euro Rises on German Data – German business confidence rises in December.
- UK GDP Report due on Friday – Predicted rise may strengthen Pound.
The EUR GBP exchange rate edged slightly higher at the start of the week after ongoing concerns for Greece’s debt weighed heavily on the Euro (EUR) last week.
Euro Pound (EUR GBP) Remains Pressured by Concerns for Greece
The Euro Pound (EUR GBP) exchange rate fell last week over fears that Greece’s debt could once again cause a crisis in the Eurozone as the European Stability Mechanism (ESM) froze all debt negotiations with Greece last week.
The move came after Prime Minister Alexis Tsipras pushed through a €617m welfare package for pensioners over the winter period without consulting its creditors. Tsipras has been accused by the ESM of breaking its agreements to implement wide ranging austerity measures, while the PM claims that the government is simply spending the extra funds it held after it had already meet its required surplus targets.
The increasingly stubborn Greek government has once against caused some investors to ponder the future of the Eurozone as they fear the impact on the Euro if a new agreement is not reached and Greece is forced out of the EU. As the Financial Times reports;
‘EU policymakers in Brussels and national capitals have been anxious to keep Greece in the Eurozone, for fear that if one member-state crashes out the whole project will be in jeopardy.’
Although such an outcome still seems a long way off, Greece’s refusal to play ball with creditors could put a forth bailout into question if it is ever required.
Euro Bolstered by Rise in German Business Confidence
The Euro has begun the session on a slightly better footing this week as the Germany’s IFO Business Confidence report saw sentiment jump from 110.4 to 111.0 in December beating expectations it would only rise to 110.6 and reaching its highest levels since February 2014.
The news helped to reverse some investor concerns as the EU’s largest economy had posted some disappointing data in recent weeks as ING Bank economist, Carsten Brzeski said;
‘The December increase suggests that German businesses are not (yet) afraid of negative economic implications from the new US President in the US.’
However Brzeski’s outlook for next year was a bit bleaker as he predicts that weaker data in 2017 will cause a slowdown in the German economy.
‘All in all, it very much looks as if 2017 could be the slimmed down version of 2016. The growth ingredients should remain the same but it will be a bit less of everything. A good recipe to lose some weight after the holidays but not the best recipe for more economic growth.’
EUR USD Exchange Rate Forecast: Pound May Rise on GDP Data
The EUR GBP exchange rate may tumble by the end of the week as the UK releases its last GDP report for the year, with economists predicting that it will rise from 2.1% to 2.3% in the third quarter.
Meanwhile the Euro may also be pressured by a drop in German Consumer Confidence on Friday as GfK is expected to report that it will fall from 9.8 to 9.7 in January.
Current Interbank Exchange Rates
At the time of writing the EUR/GBP exchange rate was trending around 0.83 and the GBP/EUR exchange rate was trending around 1.19.
