The Euro to Pound Sterling (EUR/GBP) and Euro to US Dollar (EUR/USD) exchange rates fell on Wednesday as concerns over the political situation in Greece increased and as data showed that inflation in the Eurozone remains at dangerously low levels.
Greece Concerns Forecast To Increase
Greece concerns increased today as Prime Minister Antonis Samaras begins the process of trying to win support for his preferred presidential candidate. Samaras need the support of 200 members of the 300-seat parliament to confirm his nominee, Stavros Dimas.
The PM can call on the guaranteed backing of just 155 votes. If he fails to win all three votes then under the Greek constitution snap general elections will have to be called, the outcome of which is far from certain due to the popularity of the anti-Euro left wing Syriza party.
‘Most of the lawmakers will be keeping their cards close to their chest. If Dimas gets below 160 votes then things are difficult. But essentially we’re talking about 30 or so that we’re not sure about, and they won’t reveal their intentions on the first vote,’ said Costas Panagopoulos, the chief executive at an Athens based polling company.
Lawmakers are due to hold the first of the three votes this evening.
Eurozone Inflation at 2009 Low
Eurozone Inflation declined to 0.3% in November as tumbling oil prices led to cheaper fuel and energy prices. The figure was the worst seen in five years, meaning that the inflation rate is deeper in the danger zone, and further away from the European Central Bank’s (ECB) inflation target of just under 2%.
Pressure is building on the central bank to introduce new monetary easing measures in order to stimulate growth and inflation in the single currency bloc. Economists are increasing their bets that the bank will announce a full-scale quantitative easing programme early next year.
The Pound Sterling found support from better than forecast employment data, which adds to signs that the UK economy and Eurozone economy are continuing to diverge. Unemployment across Europe remains stubbornly high whilst the jobless rate in the UK continues to fall. Better than expected wage growth data also support the Pound.
Against the US Dollar, the Euro weakened, as economists look ahead to the evenings Federal Reserve policy meeting outcome. The Fed is expected to leave interest rates unchanged but could suggest that it is edging closer to raising rates. US inflation data is also due for publication.