The Euro Pound (EUR GBP) exchange rate tumbled from its best levels yesterday as Eurozone talks between Greece’s creditors failed to reach an agreement on debt relief.
This was the first set of talks since Athens pushed through some controversial austerity measures last week, which Greece’s creditors had imposed as a requirement for the release of the country’s next round of bailout funding.
However negotiations broke down after seven hours of talks on Monday night, with Germany, Greece and the International Monetary Fund (IMF) unable to agree over how Greece’s €86bn bailout should proceed, with debt relief appearing to be a major roadblock.
Eurozone finance ministers were hopeful that the IMF would agree to take part in the bailout following Monday’s meeting, however the group was unable to see eye to eye with Germany over Greece’s debt easing plans, which the IMF believes must be laid out before it will participate in any further funding.
The lack of progress is a major concern for investors as the race is now on for some sort of agreement to be reached as Greece faces a €7bn debt repayment in July, which the nation may default upon if the next round of funding is not released soon.
Such an event could possibly send Greece crashing out of the Eurozone, something that would have major implications for the greater Eurozone economy and the single currency.
The next Eurogroup meeting will be in three weeks, with finance ministers optimistic that a deal will be reached.
In a statement released following Monday’s meeting Eurozone ministers said;
‘Work will continue in the coming weeks within the framework agreed in May 2016 with a view to reaching a definitive conclusion at the next Eurogroup meeting. This includes an ambitious and economically sound medium-term primary surplus path for Greece.’
Meanwhile, the Pound strengthened after a volatile day of trading yesterday after the Manchester terror attack on Monday night.
The attack caused all political parties to suspend general election campaigning for the time being, just a day after polls revealed that Theresa May’s lead over labour had almost halved following the release of the Conservative manifesto.
Sterling also fluctuated after mixed public borrowing figures showed that the budget deficit grew more than expected last month, although also revised down, the levels of government borrowing for March caused the deficit to beat targets in the 2016-17 financial year.
Looking ahead, the EUR GBP exchange rate may tumble further this afternoon following a speech by European Central Bank (ECB) President Mario Draghi, with analysts predicting that he will reaffirm his commitment to the bank’s ultra-loose monetary policy despite the recent uptick in Eurozone PMI’s.
Meanwhile the Pound may soften on Thursday as the UK’s latest GDP estimate is expected to confirm that Britain’s economic growth slowed from 0.7% to 0.3% in the first quarter.
However, a forecast uptick in UK business investment at the start of the year could help to stem Sterling losses as analysts predict it will jump from -0.9% to 0.2%.
Current Interbank Exchange Rates
At the time of writing the EUR GBP exchange rate was trending around 0.8608 and the GBP EUR exchange rate was trending around 1.1617.