UPDATE
The Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.42% on Monday morning.
After a significant victory for the ‘no’ campaign in the Greek referendum, the shared currency softened versus its peers. The resignation of Greek finance minister Yanis Varoufakis aside, the market is waiting on tenterhooks for the decision by the European Central Bank (ECB) as to whether to continue with the financial life support Greek banks are currently reliant upon. If they chose to end Emergency Liquidity Assistance (ELA), Greek negations will need to be swift and direct. With the Eurogroup and Greece’s creditors unwilling to compromise, the potential for a forced Greek exit has heightened significantly.
The Pound, meanwhile, is holding relatively steady versus its peers with a lack of influential domestic data to drive changes. Investors are seemingly weary to invest in the Pound with so many uncertainties in Europe, Britain’s largest trading partner.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7109.
Previously…
On Friday the Euro to Pound Sterling (EUR/GBP) exchange rate advanced by around 0.11% during the European session. The fractional Euro appreciation was the result of the International Monetary Fund (IMF) conceding that the calculations for a sustainable economic recovery were underweight, and that Greece will need a large chunk of its debt wiped in order to sustain growth. The British asset strengthened versus many of its peers during Friday’s European session in response to better-than-expected services growth. This stoked speculation that the Bank of England (BoE) will look to increase the lending rate in 2015.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7111 during Friday’s European session.
Euro (EUR) Exchange Rate Forecast to Fluctuate on Greferndum Outcome
Although there is mounting uncertainty as to which way the Greek’s will vote on Sunday, either outcome is likely to provoke shared currency volatility. A ‘Yes’ could lead to Greece’s government completely reshuffling and ultimately the end to Greek Prime Minister Alexis Tsipras’ short, but no less poignant, reign. Finance Minister Yanis Varoufakis has already stated that he will step down in the event of a ‘Yes’ victory. Naturally, a ‘No’ comes with its own volatility. Even though the IMF has admitted Greece are in a deeper hole than they originally thought, they may well refuse any funding at all if Greece says no to austerity. More defaults would ultimately lead to a Grexit.
Given that geopolitics is completely dominating Euro trade; domestic data is unlikely to be very impactful over the coming week. In addition, there aren’t any European economic data publications that hold significant weighting to disrupt the currency market over the coming week.
Pound Sterling (GBP) Exchange Rate Forecast to Strengthen on BoE Decision
The Bank of England interest rate decision is due on Thursday. Although it is incredibly unlikely that the bank will increase the cash rate at this juncture, the accompanying press conference is likely to be bullish. This is due to positive economic growth of late as evidence by improving services and construction sectors.
British economic data will be a little more impactful than that of its European counterparts. Industrial Production, Manufacturing Production, NIESR Gross Domestic Product Estimate and Trade Balance data will all be of interest to those invested in the British asset.
The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7093 – 0.7120 during Friday’s European session.