The Euro to Pound Sterling (EUR/GBP) exchange rate rallied to its best level in more than a week on Tuesday as investor confidence was boosted by plans announced by the Greek government, which are likely to be accepted by the nation’s lenders.
The EUR/GBP Exchange Rate hit a session high of 0.758
Greek Finance Minister Yanis Varoufakis proposed debt swaps in order to ease the nation’s crippling debts. The proposals would see creditors swap outstanding debts for new growth-linked bonds. It is hoped such a plan would reduce the risk of losses on privately held bonds.
In addition, aiding sentiment was eagerness from the European Central Bank and International Monetary Fund to end the troika, which oversees the progress being made in the Greek economy. To Greeks the group is seen as undemocratic and infringing upon their nation’s sovereignty.
The European Commission said that the controversial body could be scrapped and be replaced, a sign that the EU is willing to cede to some of Greece’s demands and raises hopes that a deal will be reached that will avoid a standoff which could ultimately lead to Greece leaving the Eurozone.
‘In the future, we should be able to replace the ‘troika’ with a more democratically legitimate and more accountable structure, based around European institutions with enhanced parliamentary control both at European and at national level,’ said EC President Jean Claude Juncker.
Also buoying the Euro was the announcement by the Greek government that it has dropped its calls for a write-down of its foreign debt.
‘The market is currently hoping that Greek negotiations of bailout terms will run quite smoothly. There are signs that there might be a compromise in the making and that there will not be any kind of default,’ said Gerhard Schwarz from Baader Bank.
Poor Data Widely Ignored
The markets ignored the release of Eurozone data, which did little to offer support and instead focused on the Greece situation. The reports included Spanish unemployment, which was shown to have risen more than forecast in January.
Another report on Italian inflation, which showed that the recession ravaged nbation slid into deflation, and a report, which showed that producer prices across the Eurozone, fell.
The Euro could retreat on Wednesday if PMI data from a number of Eurozone economies and the wider region comes in below economist expectations. Positive figures however, and the Euro is likely to make further gains.