Greece Misses IMF Repayment, GBP/EUR Exchange Rate Gains
The Pound Sterling to Euro (GBP/EUR) exchange rate returned to trending in the region of 1.4125 as Greece became the first developed nation to be in arrears to the IMF.
The development, while not unexpected, puts Greece under additional pressure before Sunday’s pivotal referendum.
Today’s Eurozone and UK Manufacturing PMI could have a modest impact on additional GBP/EUR movement as the day progresses.
GBP/EUR Exchange Rate Stabilises Amid Greek Debt Deal Rumours
After falling earlier in the local session, the Pound Sterling to Euro (GBP/EUR) exchange rate managed to climb 0.5% on the day’s opening levels thanks to the UK’s positive first quarter growth data.
The rate of expansion was shown to be stronger than initially forecast on both a quarterly and annual basis.
However, GBP/EUR gains were restrained by rumours that Greece’s lenders are attempting to get the nation to agree to a new deal just hours ahead of a probable debt default.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4089
Pound Sterling to Euro (GBP/EUR) Exchange Rate Softens on BoE Rate Cut Remarks
The Pound Sterling to Euro (GBP/EUR) exchange rate failed to hold the seven-year high 1.43 level on Tuesday and returned to trending around 1.40 as investors digested some provocative remarks from the Bank of England’s chief economist.
Andy Haldane inferred that an interest rate cut is as likely as a hike, in a move which was clearly designed to take the wind out of Sterling’s sails.
If the comments were a form of verbal intervention, they had the desired effect and the Pound broadly softened against its peers.
Not even a stronger-than-forecast UK Consumer Confidence reading was enough to help Sterling recover – although today’s UK GDP numbers could have a positive impact if they show the anticipated revisions.
Of course any news relating to Greece will also influence the direction taken by the Pound Sterling to Euro exchange rate today, as will the Eurozone’s latest inflation stats.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4059
Currency Update: GBP to EUR Currency Pair Achieves 1.43
After rallying beyond 1.43 earlier in the session, the GBP/EUR exchange rate returned to trending around 1.4136 in spite of German inflation data printing below expected levels.
The Euro derived some support from bets that Greece will strike a last minute deal with its creditors and was little-changed after Germany surprisingly entered deflation in May after recording a month-on-month CPI figure of -0.1%
Industry experts have implied that Greece won’t technically default if it fails to pay the IMF tomorrow and that the nation could still come to terms with its creditors provided the Greek populace vote in favour of austerity on Friday.
Newsflash: Confidence Falls in the Currency Bloc, GBP/EUR Fluctuates
The Pound Sterling to Euro (GBP/EUR) exchange rate gave up some of its recent gains in response to the publication of the UK’s Mortgage Approvals report.
Approvals were shown to have dropped from 67.6K in April to 64.4K in May. An increase to 68.8K had been forecast.
However, GBP/EUR losses were limited as the Eurozone’s Economic Confidence, Consumer Confidence and Business Climate Indexes all printed below expected levels.
The measure of economic confidence had been projected to hold at 103.8 in June but actually slid to 103.5.
Today’s German inflation numbers could prompt further GBP/EUR exchange rate movement.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4165
The Pound Sterling to Euro (GBP/EUR) exchange rate bounced to a high of 1.4297 this morning and the pairing could advance above 1.43 if the odds of a Grexit taking place continue to rise.
Greece Calls Emergency Bank Holiday, Capital Controls Drive Pound Sterling to Euro (GBP/EUR) Exchange Rate to the Best Level of 2015 Today
As markets reopened after the weekend the Pound Sterling to Euro (GBP/EUR) exchange rate surged above its previous highest level of the year so far, achieving a fresh seven-year best, as the Euro plummeted in response to the latest scene in the Greek bailout tragedy.
In hopes of preventing the collapse of its banking system, Greece announced the closure of banks nationwide and brought in capital controls.
The decision was made after Greece was refused additional funding in the run up to Sunday’s referendum on the latest bailout proposal put forward by creditors.
Given the lack of funding, it’s highly unlikely that Greece will be able to meet its upcoming debt obligation to the International Monetary Fund (IMF) and a default on its 1.6 billion Euro repayment tomorrow could spell disaster.
The situation is unravelling fast now and the odds of Greece unceremoniously leaving the Eurozone are rising day by day.
Economic advisor Mohamed El-Erian observed; ‘If you were to put a gun to my head and say ‘give me a probability right now that Greece is in the Eurozone in the next few weeks’, I would tell you it’s 15%. There’s an 85% probability it will be forced to leave the Eurozone, not because it wants to do so but because it simply is no longer able to stay.’
German Finance Minister Warns that Grexit Could Undermine Euro’s Credibility, EUR Exchange Rate Falls against US Dollar (EUR/USD) and Pound Sterling (EUR/GBP)
The prospect of Greece defaulting on tomorrow’s scheduled repayment to the International Monetary Fund is a very real one, and while a default wouldn’t result in the Hellenic nation’s immediate expulsion from the currency bloc, it would certainly set the wheels in motion.
A number of institutions have been preparing for a ‘Grexit’ for weeks in hopes of limiting the contagion of such an event, but according to German Finance Minister Wolfgang Schaueble, the biggest risk of not bringing the Greek crisis to a workable resolution is the damage it would do to the common currency.
He asserted that the dangers will mount ‘if we lose not only acceptance in our constituencies, if we lose confidence in markets, in the Euro, the monetary union. This can be dramatic. We destroy the monetary union.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Extend Gains if Eurozone Confidence, German Inflation Reports Fail to Impress
The Greek saga will continue to be the biggest cause of currency market movement in the hours ahead, but the Pound Sterling to Euro (GBP/EUR) exchange rate may also fluctuate in response to the publication of several influential reports for the currency bloc.
The Eurozone is scheduled to publish its Economic Confidence index for June, with the gauge expected to hold at 103.8.
An unforeseen increase in sentiment, in spite of current Greek concerns, could be Euro-supportive.
Industrial, Services and Consumer Confidence numbers are also due for release.
Later today Germany will be issuing its Consumer Price Index for June and economists have forecast that inflation accelerated at 0.2% on a month-on-month basis.
However, the annual figure is expected to slow from 0.7% to 0.5% – a result which could put the common currency under even more pressure.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4156, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5691, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7060 and the US Dollar to Pound Sterling (USD/GBP) exchange rate was trending in the region of 0.6373.