Newsflash: GBP/EUR Exchange Rate Holds 1.40 as Greek Stalemate Continues
The situation in Greece remains far from resolved and yet more talks are scheduled for over the weekend. With investors uncertain of whether a deal will be struck in time for Greece to avoid defaulting on its loan repayment to the IMF on Tuesday, the GBP/EUR currency pair is likely to continue trending in its current range.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.4052
Towards the beginning of this week the Pound Sterling to Euro (GBP/EUR) exchange rate came close to returning to the seven-year highs of 1.42 achieved earlier in 2015 and the pairing could rise to this level once more if Greece fails to reach an agreement with its creditors.
Pound Sterling to Euro Exchange Rate News: Greek Bailout Discussions Collapse, EU Summit Ahead, German Confidence Declines
Although the Pound Sterling to Euro (GBP/EUR) exchange rate advanced to a high of 1.4115 earlier this week as a Bank of England (BoE) official intimated he may be voting for higher interest rates in August, the pairing has since returned to trending around 1.40.
The Euro managed to stand firm against its British peer even as it was reported that the latest round of bailout negotiations between Greece and its lenders broke down within an hour and yielded no notable progress.
As stated by The Guardian; ‘The International Monetary Fund (IMF) has told [Greek PM Alexis] Tsipras and his team that the Greek plan is too reliant on tax increases, which have failed to deliver anticipated revenue streams in the past. The fund has also criticised what is sees as only half-hearted measures to reform the Greek economy by tearing down hundreds of regulatory barriers. Greece’s creditors are also demanding faster and more sweeping reforms to the Greek pension system.’
Greece is rapidly running out of time, and funds, so it’s hoped that progress on the issues may be made today during a gathering of representatives from across the European Union.
The Guardian went on to comment; ‘The ECB, which is holding daily meetings on Greece, has pumped about €89bn into the Greek financial system to keep banks afloat. On Thursday it decided to maintain emergency liquidity funding at current levels, suggesting that the pace of withdrawals from Greek banks may have ebbed.’
The Pound Sterling to Euro (GBP/EUR) exchange rate remained trading around the day’s opening levels following the publication of the German GfK Consumer Confidence Survey.
The index for July had been expected to hold at 10.2 but it actually eased to 10.1. Earlier this week the IFO’s German Business Climate/Conditions surveys also fell short of forecasts.
GfK commented; ‘Despite the slight drop, private consumption in Germany remains the main pillar supporting the economy. But the latest development shows that the consumer climate is also vulnerable to international risks. The battle to resolve the Greek debt crisis is escalating and it is looking ever more likely that the country will default. And that could cause the economic motor to start stuttering.’
Countdown to Greek Default Forecast to Cause Euro (EUR) to Pound (GBP), US Dollar (USD) Exchange Rate Movement
Although ecostats like the Confederation of British Industry’s Reported Sales number and the US Markit Services PMI could cause modest GBP/EUR and USD/EUR exchange rate movement today, the situation in Greece will remain the biggest currency-market mover until some kind of solution is found.
This is the BBC’s schedule for Greece in the week ahead:
Thursday-Friday: Finance ministers to put finishing touches to a debt deal if reached; then scheduled meeting of all 28 EU member states – any agreement could receive leaders’ backing here
Saturday-Tuesday: Agreement will need to be approved by Greek parliament and other Eurozone governments – including vote in German Bundestag
Tuesday 30 June: Deadline for Greek repayment of €1.6bn to IMF
With so little time left until Greece must meet its debt obligation, some investors are hopeful that either the Hellenic nation or its creditors will concede some ground in order to prevent a potentially disastrous Greek exit from the Eurozone.
Pound Sterling (GBP) Exchange Rate Could Return to 2015 Highs against Euro (EUR) and US Dollar (USD) if BoE Interest Rate Hike Bets Rise, But Brexit Concerns Remain
Although the current Greek crisis is the main directing force in the Pound Sterling to Euro (GBP/EUR) exchange rate, the Pound is also benefiting from upbeat UK economic reports, like last week’s encouraging inflation and employment figures.
If UK data continues to impress, the Bank of England (BoE) could bring forward its timeline for increasing interest rates, with a revision potentially taking place in 2015. Such an eventuality would prompt a widespread Sterling rally and the GBP/EUR and GBP/USD exchange rates could return to (and even move beyond) their best rates of 2015.
However, today’s EU summit is also set to see UK Prime Minister David Cameron talk to his counterparts about Britain’s place in the European Union. If the PM can’t reform the relationship between the UK and the EU a Brexit could be on the cards, and that would be a Pound-negative development.
BNP Paribas Pound Sterling to Euro Exchange Rate Forecast: EUR Declines Could Follow Greek Deal
In the view of BNP Paribas; ‘Nervousness about Greece had contributed to a short squeeze in the EUR. BNP Paribas Positioning Analysis highlights that the EUR’s rally corresponded to a substantial lightening of short EUR positioning.’
The continued; ‘A resolution to Greek uncertainty boosts risk appetite and, given the EUR’s status as a funding currency, encourages risk taking funded in the EUR. This is the key reason why good news on the Greek situation is bad news for the EUR and, with short EUR positioning at light levels, there is scope for additional downside. If Greek discussions were to deteriorate again we expect the EUR to initially squeeze higher as the recently established short positions are unwound amid a risk-off backdrop. Beyond a squeeze, however, the EUR is likely to decline.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4016 while the Euro to Pound Sterling (EUR/GBP) exchange rate is trending in the region of 0.7134.