The Euro to Pound Sterling (EUR/GBP) exchange rate was under pressure on Monday, as economists remain jittery over the situation in Greece, and as data out of Germany came in below expectations.
The EUR/GBP exchange rate hit a session low of 0.735
Greece is set to deliver reform measures to its creditors today in order for the nation to secure an extension to its current bailout. The leftist Syriza led government was attacked by a number of its supporters and accused of lying to its supporters after it failed to keep its promise that it would not seek out a bailout.
‘By renaming the troika ‘the instituions’ , the memorandum as ‘agreement’ and the lenders as ‘partners’… you do not change the previous situation,’ said Manolis Glezos, a 92-year old member of the European Parliament and Syriza’s most senior politician. Glezos has called for Syriza supporters to demand explanations for the apparent capitulation of their leaders.
The comments suggest that all is not well within Syriza and has caused some analysts to raise their bets that the current Greek government could falter and perhaps collapse.
Last Friday saw the Euro recover previous losses as the news of a deal increased optimism that Greece will give in to its creditor’s demands and avoid an exit from the Eurozone. The German Berenberg bank said it has now cut its chances for a ‘Grexit’ to 25%.
Investors remain nervous however as the proposed reforms made by Athens could still be rejected if they do not go far enough. If the proposals are rejected, than another meeting of European Finance Ministers will need to be held on Tuesday. If no deal is confirmed then the current bailout will expire on Saturday.
German Data Misses Forecast
The latest IFO business climate index came in at 106.8 in February, an improvement on the preceding months figure of 106.7. Despite the rise, the figure was below economist expectations for a reading of 107.7.
‘We do see significant potential for a larger step-up in German growth. Growth may even accelerate a bit further as commodity prices reach their lows in the current quarter and the growth contributions from the currency and sentiment rise,’ said an economist from JPMorgan Chase & Co.
The Euro to Pound Sterling exchange rate is expected to trade in a tight range for the rest of the session due to a lack of market moving data releases from the UK. If Greece’s proposals are rejected, we can expect to see the Euro weaken. The opposite will likely occur however if a deal is reached.