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Growing Grexit Concerns Weakens Euro Pound Exchange Rate

  • EUR GBP Pressured by Greece – Increasing fears of a so-called ‘Grexit’.
  • UK Parliament Backs Brexit Bill – PM given power to trigger Article 50 in March.
  • Euro Weakened by German Data – Trade surplus shrinks faster than expected in December.

The EUR GBP exchange rate continued to downtrend this morning as investors grew increasingly worried over the possibility of Greece leaving the European Union.

Euro Pound (EUR GBP) Softened by Fears of a Possible ‘Grexit’

The Euro Pound (EUR GBP) exchange rate tumbled further this morning over persistent concerns of the state of Greece’s debt.

The renewed focus on Greece comes after the International Monetary Fund (IMF) pushed for further support in relieving the nation’s debt, saying;

‘Greece cannot grow out of its debt problem. Greece requires substantial debt relief from its European partners to restore debt sustainability.’

However members of the Eurozone remain unconvinced after negotiations of a third bailout broke down between Greece and the European Stability Mechanism (ESM) over Prime Minister Alexis Tsipras’ reluctance to implement further austerity measures.

Germany, Greece’s largest creditor, is also extremely reluctant to provide further assistance due to the run up to elections later this year as many in Germany are becoming increasingly frustrated with the amount of money being thrown at the country.

This has ultimately led to concerns that Greece will default on its debts and be left to crash out of the Eurozone. However, with the country having adopted the single currency, its departure is likely to have a far greater impact on the Euro than Brexit.

Sterling (GBP) Strengthens as House of Common Passes Brexit Bill

Market sentiment in the Pound was bolstered yesterday evening as the government’s bill to trigger Article 50 passed its first major hurdle, clearing the House of Commons by 494 votes to 122.

While investors are still not pleased about the government’s decision to pursue a ‘hard Brexit’, they reacted positively to the passing of the bill as it will help to make the Brexit process clearer. Traders were also upbeat about the decision to give MPs a final vote on the terms of Brexit, even if it wasn’t the exact deal they had been hoping for.

However, the legislation still faces a vote in the House of Lords, where a Strong Lib Dem presence could hinder the bill, possibly delaying Theresa May’s plans to trigger Article 50 in March.

Disappointing German Trade Surplus Weighs on Single Currency

Demand for the Euro was also slightly dampened by the release of worse than expected German Trade Balance figures as the nation’s trade surplus slipped from €22.7bn to €18.7bn in December.

However, the news that Germany’s trade surplus reached a new all-time high in 2016 was able to stem the single currency’s losses as analysts predict that 2017 results will climb higher again as demand for German exports remains strong.

EUR GBP Exchange Rate Forecast: UK Trade Balance Ahead

The UK will release its own trade report on Friday with the EUR GBP exchange rate likely to fall further if Britain’s trade deficit falls in December as expected.

The Pound is also likely to be strengthened by the release of a slew of production data tomorrow as figures are expected to show that production improved on a yearly basis despite the pressures of Brexit.

Meanwhile, a lull in Eurozone data is likely to hamper the Euro’s efforts to recover as investors are left to focus on the situation in Greece.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.85 and the GBP EUR exchange rate was trending around 1.17.