Greek Default Forecast to Trigger GBP/EUR Rebound Today
The Pound Sterling to Euro (GBP/EUR) exchange rate’s advance to a seven-year high of 1.43 proved short lived and hints that the Bank of England might cut interest rates were enough to knock the pairing all the way back to 1.40.
However, with economists expecting Greece to miss tonight’s repayment deadline to the IMF, there is every chance that the GBP/EUR pairing could resume its bullish trend as the week continues.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4065.
Germany Enters Deflation, GBP/EUR Exchange Rate Falls from 1.4303
The Pound Sterling to Euro (GBP/EUR) exchange rate briefly hit a fresh seven-year high of 1.4303 during the European session due to concerns regarding tomorrow’s Greek debt repayment to the IMF.
Sterling did go on to trim these gains as the day progressed but was still up on the day’s opening levels.
Greece is still driving the heartbeat of the currency market but Euro sentiment wasn’t done any favours by the latest German inflation numbers.
Economists had expected Germany’s Consumer Price Index to come in at 0.2% on the month and 0.5% on the year, but the Eurozone’s largest economy actually entered deflation territory in June with a monthly figure of -0.1% and an annual number of 0.3%. This sign of weakness in the Eurozone’s core could encourage the European Central Bank (ECB) to increase stimulus measures later in the year.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4136
FX News Now: Eurozone Confidence Drops as Breakdown of the Currency Bloc Looms
Although the Pound Sterling to Euro (GBP/EUR) exchange rate moved away from its highest level of the year so far as the European session progressed, the pressure piling on the Euro was added to by the currency bloc’s latest confidence reports.
The Eurozone’s Economic Confidence gauge fell from 103.8 to 103.5 in June, rather than remaining unchanged, while the region’s Business Climate Indicator dripped from 0.28 to 0.1 and the Consumer Confidence measure eased to -6 from -5.6.
The decline in confidence is hardly surprising given concerns that a Greek exit from the Eurozone could mark the beginning of the end of the currency bloc as a whole.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4161.
Newsflash: Emergency Greek Bank Holiday Sends GBP/EUR Above 1.42
The Pound Sterling to Euro exchange rate jumped as the Asian session opened and investors digested the fact that Greek banks have been closed.
Some sources have implied that banks will remain shut down until the weekend’s referendum so the Greek government doesn’t have to deal with the collapse of the banking sector on top of everything else.
While the pairing has since moved away from the high of 1.4297 struck earlier in the day, GBP/EUR is likely to remain around the 1.42 level as the situation develops.
The Pound Sterling to Euro (GBP/EUR) exchange rate could advance to its highest levels of 2015 this week as industry experts deem a Greek exit from the Eurozone as ‘inevitable’.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: Greece Refused Bailout Extension, Sterling Supported by BoE Interest Rate Hike Expectations
The odds of Greece exiting the Eurozone rose dramatically on Friday as the nation’s Prime Minister rejected the latest reform proposal put forward by creditors and called for a public referendum on the issue to be held on Sunday July 5th.
Given that Greece has a large debt repayment scheduled for June 30th and currently doesn’t have the funds to meet its obligation, this additional delay in the bailout negotiations could see Greece end up in arrears and possibly forced out of the currency bloc as a result.
Greek PM Alexis Tspiras is acting under the assumption that the referendum will result in the Greek people saying ‘an emphatic no to the ultimatum’ put forward by lenders.
He stated; ‘The creditors have not sought our approval but have asked for us to abandon our dignity. We must refuse.’
Although Greek Finance Minister Yanis Varoufakis requested an extension of the nation’s current bailout programme until the referendum is held, the Eurozone’s Finance Ministers have refused – with many voicing anger at the way Greece has acted during the five-month long discussions.
While these latest developments have kept the Euro under pressure, the Pound has been deriving support from the belief that the Bank of England (BoE) is moving closer to voting for higher interest rates.
Last week BoE policymaker Martin Weale intimated that he might start pushing for higher borrowing costs in August. If UK data continues to show a more rapid rate of economic expansion in the second quarter, the BoE could be on course to hike before the end of this year.
Euro (EUR) Exchange Rate Forecast to Experience Testing Times with Greek Referendum and Default Ahead: EUR/GBP, EUR/USD Movement Likely
Given the current state of play, we can expect notable Euro to US Dollar (EUR/USD) and Euro to Pound Sterling (EUR/GBP) exchange rate movement over the next few days.
Euro declines were a little limited over the weekend as the European Central Bank (ECB) announced that it wouldn’t be cutting off funding to Greek banks.
As stated by The Guardian; ‘In recent weeks, the Greek banks have only been able to stay open because Draghi has provided funds to compensate for capital flight. Once the ECB switches off the life support, the Bank of Greece will have to announce either a bank holiday or capital controls, and probably both.
Germany strongly supports the immediate end to emergency liquidity assistance (ELA), arguing that taxpayers in the rest of Europe should not be further exposed to the risk of a Greek exit from the single currency. But the ECB has always been reluctant to take what would clearly be a political decision to escalate the pressure on the Greek banks, and has announced that it will continue providing funding at last week’s level.’
While the ECB’s decision will come as a relief to the Greek government, it’s very much a temporary solution to an extremely pressing problem.
Tuesday will be decisive. If Greece defaults on its 1.6 billion Euro repayment to the IMF, it could spell the beginning of the end of the nation’s Eurozone membership.
The Eurozone might be set to publish some fairly influential ecostats this week, including inflation and German employment figures, but Greek concerns will be the deciding factor in how the Euro performs against peers like the Pound and US Dollar this week.
UK GDP and PMI Reports Predicted to Cause Pound Sterling (GBP) Exchange Rate Volatility: GBP/EUR, GBP/USD May Advance this Week
Greece may be the word, but whether or not the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates advance this week may also be down to how strongly UK reports come in.
The nation is set to publish growth numbers – with economists expecting first quarter GDP to be positively revised – as well as the always influential Markit Manufacturing, Services and Construction PMIs.
If the gauges move further above the 50 mark separating growth from contraction, GBP/EUR and GBP/USD gains could be on the cards.
This Week’s Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast – Sterling Could Hit Best Rate of 2015
Given that some industry experts believe Greece will fail to meet its debt obligation on Tuesday, the short term outlook for the Pound Sterling to Euro (GBP/EUR) exchange rate is neutral-positive.
Barring any major surprises (like Greece suddenly coming to terms with its creditors) the GBP/EUR currency pair could be on course to climb above 1.42 this week.
On Sunday the Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4098