The Pound Sterling to Euro (GBP/EUR) exchange rate weakened to its lowest level in a week on Monday as fears over a Greek exit from the Eurozone eased slightly and as economic data showed that manufacturing in the Eurozone remained in expansion territory.
‘Grexit’ Fears Ease
At the weekend, the Euro found support, as Pierre Moscovici the EU’s economic and financial affairs commissioner said that Greece belongs in the Eurozone and that the Eurozone depends on there not being a ‘Grexit’. His comments buoyed hopes that the New Greek government and the Troika of the EU, ECB and IMF will come to terms over the nation’s bailout and debts.
‘We believe that the place of Greece is in the Eurozone, the Euro needs Greece and that Greece needs and wants to be in the Eurozone,’ said Mr Moscovici in an interview with the BBC.
Concerns over a Greek exit were further eased when Greece’s new finance minister, Yanis Varoufakis said that his priority is the well-being of all Europeans and ruled out accepting more bailout cash. The comments follow those made by New Greek Prime Minsiter Alexis Tsipras who said that he was confident a deal will be reached with creditors.
Also supporting the Euro was the release of data, which showed that manufacturing activity across the Eurozone remained in expansion territory for another month in January. The PMI rose to 51.0 points, up from the 50.3 recorded in December and matched economist forecasts.
Ukraine Conflict Forecast to Strengthen GBP/EUR Exchange Rate
Gains for the single currency are forecast to be short-lived however as traders cast a wary eyes towards events in Ukraine. The conflict in the east of the country looks set to escalate further and will likely illicit a response from the European Union and its allies.
Pro-Russian leader Alexander Zakharchenko announced plans to recruit 100,000 men, a move that would cause the heavy fighting to increase sharply. Dozens of civilians were killed over the weekend and Zakarchenko has said that will begin mobilisation of his forces in 11 days time. The conflict shows no sign of ending as peace talks held in Belarus ended in failure when rebel representatives failed to show up.
As the war rages, the EU and USA will likely look to introduce more economic sanctions against Russia, who they see as supplying troops and supplies to the rebels.
The imposition of sanctions last year negatively influenced the already fragile Eurozone economy and an escalation would likely weaken it further.
Also in focus for GBP/EUR exchange rate traders will be this week’s Bank of England (BoE) policy meeting. Sterling was softer in today’s session as a PMI report showed that UK manufacturers cut prices, adding to expectations that the BoE will not raise interest rates this year.
Euro Exchange Rates:
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