UPDATE
The Greek government have been given just hours to prepare and submit reform proposals to unlock aid. Greek banks are on the brink of total collapse and there is still no guarantee Greece will remain part of the currency bloc. This has weighed on demand for the common currency, although the Euro has avoided a large declination as cautious trading dampens volatility.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Decline on UK New Car Registrations
The Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.70% on Monday afternoon.
The Greek referendum saw a 61% majority ‘no’ vote to the austerity measures proposed by Greece’s creditors. The shared currency softened versus its peers in response to the news, although the depreciation has been fractional thus far. This is because there is so much uncertainty regarding Greece’s future as a member of the Eurozone and how the Eurozone will be affected by a Grexit, which has seen market volatility reduced at this juncture.
The European Central Bank (ECB) is also set to make a decision on whether to maintain Emergency Liquidity Assistance (ELA) for Greek banks which is currently keeping the Greek financial system afloat. The trouble for the ECB is that ELA was designed to help banks that are solvent, and it is difficult to argue the case that Greek banks meet that criteria. Even if the ECB opt to maintain the capped ELA it is currently providing, many analysts fear it won’t be enough to prevent financial collapse in the Hellenic nation.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7090.
The Pound, meanwhile, edged higher versus its major rivals despite fears that a Grexit would negatively impact British exports. The appreciation can be linked to New Car Registrations which hit a record half year advance of 7.0%. On the year, New Car Registrations advanced by 12.9% in June.
Mike Hawes, SMMT Chief Executive, said, ‘It is still a great time to buy a new car in the UK, and it is encouraging to see more consumers choosing British models. This is important for the wider economy with 799,000 people now employed across the UK automotive sector, including retail. We anticipate a flatter second half of the year as the market finds its natural running rate.’
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7067 – 0.7122.
Euro to US Dollar (EUR/USD) Exchange Rate Forecast to Soften on Safe-Haven Demand
The Euro to US Dollar (EUR/USD) exchange rate declined by around -0.39% on Monday afternoon.
With Greek banks so close to collapse, Prime Minister Alexis Tsipras is running out of time to secure a deal for Greece. This could be a stumbling block given creditors and Eurogroup finance ministers are showing reluctance to compromise. Tsipras can’t now agree to austerity measures rejected by his people, and the Eurogroup can’t be seen to go easy on Greece after other Eurozone members have had to deal with harsh austerity measures enforced by creditors. This makes the prospect of a Grexit and return to the Drachma all the more likely.
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1075.
The US Dollar, meanwhile, strengthened as a result of traders flocking to safe-haven assets amid so much geopolitical uncertainty in Europe. The US Dollar also gained in response to speculation that the Federal Reserve will increase the cash rate within 2015. ‘The Fed will raise rates in the back half of the year,’ said Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. ‘The strength of the Dollar will be there, but I don’t think you’re going to get the kind of moves that you had certainly in 2014 or the early part of this year.’
The Dollar rally was pegged back a little, however, after the ISM Non-Manufacturing Composite failed to meet with expected growth. June’s ISM Non-Manufacturing Composite was forecast to increase from 55.7 to 56.4, but the actual result only reached 56.0 in June.
The Euro to US Dollar (EUR/USD) exchange rate was trending within the range of 1.0991 – 1.1096 today.