The Euro to Pound Sterling (EUR/GBP) exchange rate rallied by around 0.87% on Tuesday morning.
After Greece surprised economists by repaying the International Monetary Fund (IMF) €750 million earlier-than-expected, the shared currency advanced versus all of its most traded currency competitors. However, the lack of progress between Greece and the Eurogroup is still weighing on Euro investment.
The Pound, meanwhile, softened from a sustained bullish run in response to the Conservative victory in the general election. The declination can be attributed to the prospect that Prime Minister David Cameron will bring the European Union referendum forward to 2016 to avoid difficultly from right-wing back-benchers.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7217.
Yesterday…
The Euro to Pound Sterling (EUR/GBP) exchange rate softened by over 1.0% on Monday afternoon.
Although gains from the Conservative win in the general election have slowed somewhat, the Pound is holding its advance versus the majority of its most traded currency rivals. Sterling appreciation was solidified by the Bank of England (BoE) leaving the benchmark interest rate at the record-low 0.5%, in line with analysts’ forecasts.
The Euro, meanwhile, declined versus most of its major peers amid speculation that the Eurogroup will not approve Greece’s program of reforms in time for Tuesday’s International Monetary Fund (IMF) repayment.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trending in the region of 0.7183.
Euro (EUR) Exchange Rate Forecast to Soften versus its Major Competitors as Greek Officials Refuse to Compromise on Election Promises
As the Eurogroup meetings to discuss Greece’s financial crisis continue to fail to bear fruit, the shared currency is softening amid weak sentiment. The meeting taking place today is not expected to show any significant progress as both sides are at loggerheads over Greece’s unwillingness to budge on what they describe as ‘electorate red lines’. The Greek government, who were voted in for their anti-austerity message, find themselves between a rock and a hard place as they attempt to balance pleasing their people and their creditors.
Finance Minister Yanis Varoufakis acknowledged that the meeting today will be ‘difficult’, stating; ‘The Greek government is struggling in a very tough negotiating fight to achieve an agreement that will not only be an agreement to have a disbursement (of aid) but one that will deliver a substantive hit to the crisis,’ he said. ‘I think the solution will be given in the coming days and not necessarily today. We will do whatever we can to achieve (liquidity) relief today.’
With a €750 million IMF repayment due tomorrow, time is not a luxury Greece can afford. With heightened expectation that they will default on the payment, the discussions with the Eurogroup cannot be allowed to drag out for much longer.
The Euro to Pound Sterling (EUR/GBP) exchange rate has fallen to a low today of 0.7176.
Pound Sterling (GBP) Exchange Rate Forecast to Hold Gains versus its Major Rivals after BoE Keep Interest Rates Unchanged
As explained above, the appreciation seen after the Conservative victory in the general election has tailed off to a certain extent. The Pound is generally holding its advance versus its major competitors despite the knowledge that the UK will be faced with a referendum on whether to remain a member of the European Union.
The BoE kept the benchmark interest rate on hold, a move predicted unanimously by analysts. Wednesday’s Inflation Report will be significant for those invested in Sterling, however, as the BoE will likely outline their economic plan under the new government.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Trend Lower as Grexit Potential Mounts
With the Eurogroup meeting unlikely to show any significant progress between Greece and Eurozone officials, and with the Pound holding gains on approval for the Tory victory, the Euro to Pound Sterling (EUR/GBP) exchange rate is likely to continue trending lower for the remainder of Monday’s European session.
Tuesday ought to see heightened EUR/GBP volatility as the European Union’s Economic & Financial Affairs Council Meets in Brussels, and with UK Industrial and Manufacturing Production data due for publication.
The Euro to Pound Sterling (EUR/GBP) exchange rate climbed to a high of 0.7257 today.