Standard and Poor’s Greece Downgrade Weighs on Euro (EUR) Exchange Rate
The Pound Sterling to Euro (GBP/EUR), Pound Sterling to Canadian Dollar (GBP/CAD) and Pound Sterling to US Dollar (GBP/USD) exchange rates were all trending higher in Friday’s trading session ahead of UK Unemployment Rate, Average Weekly Earnings and Employment Change data.
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate jumped on Thursday after Standard & Poor’s downgraded Greece’s short and long-term sovereign credit ratings from B-/B to CCC+/C after prolonged negotiations over the nation’s austerity deal seemed to be going nowhere, while the Pound Sterling to Canadian Dollar (GBP/CAD) and Pound Sterling to US Dollar (GBP/USD) exchange rates traded within a narrow range.
Standard & Poor’s stated: ‘Without deep economic reform or further relief, we expect Greece’s debt and other financial commitments will be unsustainable.’
‘In our view, these conditions [business, financial, economic] have worsened due to the uncertainty stemming from the prolonged negotiations from between the almost three-month old Greek government and its official creditors.’
The downgrade is hardly surprising; left-wing party Syriza was voted into power in an attempt to renegotiate Greece’s austerity deal which has been crippling the country’s economic growth.
However, the party seems to have been dragging its feet when it comes to negotiations, with no progress seemingly made since the initial talks began at the start of the year.
S&P’s continued: ‘In our opinion, economic prospects could deteriorate further unless talks between Greece and its creditors conclude soon.’
High time for #Tsipras government to compromise. Negative economic & political consequences too high if developments spiral out of control.
— Janis Emmanouilidis (@jaemmanouilidis) April 16, 2015
But the downgrade isn’t Greece’s only problem, the nation is hovering dangerously close to completely running out of funds after already using its disaster reserves to make its International Monetary Fund (IMF) loan repayments in recent months.
However, Thursday saw Greece tentatively ask if it could delay making further repayments to the IMF–a development that saw Greece’s request refused.
Meanwhile, the US Dollar could be in for some exciting movement today with the release of US Building Permits, Housing Starts, Initial Jobless Claims, Continuing Claims and the Philadelphia Federal Reserve Index.
Furthermore, Federal Reserve officials are scheduled to speak at various venues on the topics of economic outlook, monetary policy and inflation which could offer the US Dollar to Euro (USD/EUR), US Dollar to Canadian Dollar (USD/CAD) and US Dollar to Pound Sterling (USD/GBP) exchange rates the opportunity to move.
Speculation surrounding the US Federal Reserve and interest rate hikes has been enough to cause major swings in the US Dollar in recent months as investors hedge their bets.
US oil prices jumped to the highest level seen yet in 2015 as experts suggested that the level of crude oil output may be reaching its pinnacle.
Industry expert Darwei Kung commented: ‘The [production] growth rate has slowed down, and we might be at a tipping point for how fast the growth has been going.’
As a result, the Canadian Dollar exchange rate was able to climb, recording an almost 2 cent rise against the US Dollar (CAD/USD), a three-month high. An additional factor of support was the Bank of Canada’s (BOC) decision to keep interest rates on hold at 0.75% rather than making another cut as some economists had thought.
However, now the BOC rate decision is out of the way, economists and investors are likely to focus intently on oil prices which are forecast to determine a lot of the Canadian Dollar’s movement.
This week has seen the International Energy Agency suggest in its monthly projection that the ‘the outlook is only getting murkier’ for oil.
Industry expert Gareth Watson threw in his two cents regarding oil forecasts, saying: ‘It’s such a streaky commodity. One second you think the world absolutely hates it, and the next you think the world absolutely loves it. I’m just not 100% convinced this is the beginning of a march up to higher (oil prices) on a more permanent basis.’
Pound Sterling to Euro (GBP/EUR), US Dollar (GBP/USD) and Canadian Dollar (GBP/CAD) Exchange Rate Forecast
The Pound Sterling exchange rate is forecast for a highly influential day on Friday with a host of UK labour market ecostats out for release. The UK Average Weekly Earnings, Employment Change and Unemployment Rate numbers will detail any progress in the employment sector.
Any upbeat developments could offer some serious support to the Pound Sterling to US Dollar (GBP/USD), Pound Sterling to Canadian Dollar (GBP/CAD) and Pound Sterling to Euro (GBP/EUR) exchange rates.
Eurozone, Canadian and US inflation ecostats will also be out in Friday’s trading and therefore, the GBP/EUR, GBP/USD and GBP/CAD currency pairs could be in for an extremely interesting day of trading.
UPDATE: Core Canadian inflation recorded a climb from 2.1% to 2.4% in March on the year, while the non-core reading hit 1.2% from 1.0%.
Meanwhile, US data was a little less impressive with the non-core measure falling into deflation at -0.1% from the previous 0.0% and the core measure climbing only slightly from 1.7% to 1.8%.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is reaching 1.8250. The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4829; the Pound Sterling to Euro (GBP/EUR) exchange rate is trending in the region of 1.3948.