The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened above the 1.40 level on Friday as worries over a ‘Grexit’ intensified following the failure of Thursday’s bailout talks. Fears of a Greek banking crisis have also risen as Greek citizens continue to withdraw money from their accounts.
The Pound Sterling to Euro (GBP/EUR) exchange rate hit a session high of 1.4031
Despite neither side seeming willing to back down on the issue of economic reform measures, Greek Prime Minister Alexis Tsipras said that he still believes that a deal will be reached. It appears as though he is gambling that the nation’s creditors will be unwilling to allow Greece to default on its debts and will compromise in order to keep it in the Eurozone.
‘The famous Grexit cannot be an option for the Greeks or European Union. This would be an irreversible step; it would be the beginning of the end of the Eurozone. The Greek government cannot absorb the savings programme forced upon it by the EU and the International Monetary Fund. They would also not be positive for the Greek economy. Greece would not become more competitive and the debts would not be reduced. The whole concept needs to be changed,’ Tsipras said after talks in Luxembourg between European finance ministers collapsed.
Athens now has less than two weeks to reach a compromise and unlock bailout funds worth billions of Euros. If it fails to do so the nation will default on its €1.6 billion repayment to the IMF. If such an event occurs than it could set off a series of events that could lead to the nation leaving the Eurozone and potentially the European Union.
Emergency EU Summit Set for Monday, Will Greek Deal Be Struck?
In an attempt to resolve the crises, Eurozone leaders will hold an emergency summit on Monday.
They will try to avert a Greek default but it is highly unlikely that anything will be achieved as neither side appears willing to end the deadlock over the bailout deal.
IMF Chief Christine Lagarde has warned that Greece would not be given any more leeway on its repayments, meaning that the deadline of June 30 is now set in stone according to Lagarde.
UK Preparing for Worst, Further GBP/EUR Currency Movement Expected
The UK’s Chancellor George Osborne announced that Britain was preparing for the worst and was taking measures to protect the nation’s economy from the affects of a ‘Grexit’.
‘We have entered the eleventh hour of this Greek crisis, and we urge the Greek government to do a deal before it is too late. We hope for the best, but we now must be prepared for the worst,’ said Mr Osborne.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
Looking ahead to next week the Pound Sterling to Euro (GBP/EUR) exchange rates movements will continue to be dominated by the Greek crisis.
A lack of market moving UK data will mean that the Pound will react to events elsewhere.
The main data release due for the Euro will be Wednesday’s German IFO business climate report.