Progress towards Approval of Greek Bailout Holds the Single Currency (EUR) Strong, GBP/EUR Exchange Rate Dips Lower
The third bailout of Greece is hoping to progress further towards a final agreement today, as Greek parliamentary committees are due to discuss the terms of the plan ahead of tomorrow’s proposed vote. With European finance ministers also due to assess the proposal on Friday it certainly seems as if the 20th August European Central Bank (ECB) deadline is on track to be met.
In spite of anticipations of an improvement in this morning’s UK employment data, however, the GBP/EUR exchange rate remains in a distinct downtrend, presently at 1.4030.
As ZEW Economic Sentiment results proved of limited value to the Euro (EUR) word of a positive conclusion to bailout talks in Athens prompted another rally for the common currency, leading the GBP/EUR exchange rate to lose further ground.
Pound (GBP) Began to Make Gains as Investor Confidence in the Eurozone Weakened and the Euro (EUR) Softened
The week started relatively slowly for both the Pound (GBP) and the Euro (EUR), with little in the way of economic data being released on Monday. Posted on that morning, however, was the Sentix Investor Confidence Index for the Eurozone, which triggered something of a turnaround for the beleaguered Sterling. The number ultimately fell short, not just of the 20.3 forecast but also of the previous month’s figure of 18.5, to clock in at just 18.4. Delivering a blow to the previous optimism of the European bloc, this result suggested that economic concerns in the Eurozone may run deeper than just the persistent issue of the Greek crisis. In response the GBP/EUR exchange rate rose from a weekly low, trending upwards throughout the rest of the day to peak at 1.4172.
Eurozone Results Drive GBP/EUR Exchange Rate Today, Greek Bailout Confirmation Bolsters Single Currency (EUR) in spite of Mixed Economic Sentiment
Today’s more key ZEW Economic Sentiment Indexes for Germany and the Eurozone were somewhat varied, with the Eurozone’s improving from 63.9 to 65.7 while the German figure instead saw an unanticipated, significant fall from 29.7 to 25. A better outlook for Greece no doubt shored up the overall index, although the cause of the German shortfall remains a little hard to attribute. Possible faltering within the Eurozone’s foremost economy naturally raises concerns for investors, bringing the strength of the common currency into question.
Any damage this might have caused, however, was swiftly mitigated by this morning’s decidedly positive reports from Athens, as Greek finance minister Euclid Tsakalotos announced that an agreement is all but done between the Hellenic nation and its creditors. With time enough to pass the deal through Greece’s parliament and Eurozone finance ministers the news bodes well for the avoidance of a default to the European Central Bank (ECB) on the 20th August payment deadline.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Potential Resurgence for Sterling Tomorrow on Employment Data, Euro Could Remain Strong
In contrast, a lot more data will be seeing publication tomorrow, with Unemployment Rate and Employment Change from the UK and the Eurozone’s Industrial Production year-on-year and month-on-month figures due out. Together these could be the makings of a more significant rally and upturn for the Pound, assuming that the UK figures do not prove to be another disappointment for the market.
As always, further news from Greece will continue to hold the potential to prompt some major movement for the GBP/EUR exchange rate as the week progresses. If German ministers maintain their current downplaying of the agreement and repeat expressions of a desire to take further time over the fine print of the deal this could begin to wear at the increased optimism of investors. Any holdups or snags remain a threat to the outlook of the Euro as the ECB repayment looms.
Current GBP, EUR Exchange Rates
At time of writing the Pound Sterling to Euro (GBP/EUR) pairing was trending narrowly at 1.4134, with the Euro to Pound Sterling (EUR/GBP) exchange rate experiencing equally limited movement in the range of 0.7075.