On Tuesday the Pound Sterling to Euro (GBP/EUR) exchange rate gave up the gains it made in the preceding session as economists grew hopeful that Greece will be able to negotiate with the troika of the EU, ECB and IMF and not leave the Eurozone.
Monday saw the Pound Sterling to Euro (GBP/EUR) exchange rate surged to a new seven-year high before easing slightly after the anti-bailout Syriza party claimed victory in the Greek general election and the single currencies recent declines were ‘overdone’.
The GBP/EUR Exchange Rate hit a session high of 1.344
Following the announcement of the Syriza win, the markets became jittery on concerns that support for other anti-austerity and anti-European Union political movements across the region will rise. With national elections due for the UK, and Spain this year, economists are forecasting a big upward surge in support for such groups.
‘We saw the Euro selling off initially, but now we’ve had a bit of a bounce. We’ve moved such a long distance over a short period time that maybe some people think it’s time to lighten positions. We had a fairly strong assumption of who was going to win the election so the next part is the key issue,’ said Jeremy Stretch, head forex strategist at Canadian Imperial Bank of Commerce.
Syriza won 149 seats in the 300-seat Greek parliament, just two short of attaining an overall majority. The party is in talks with the right-wing Independent Greeks who won 13 seats to create a coalition.
Syriza Win Creates Volatility, Euro Rallies
Whilst Tspiras general election win was not a surprise, it now raises many questions over Greece’s future in the Euro and the future of the Eurozone as a whole. As a result, the Euro weakened sharply in the early hours of Monday.
Greece has endured tough budget cuts in return for its 2010 bailout, worth €240bn (£179bn; $268bn) and negotiated with the so-called troika – the European Union, International Monetary Fund (IMF) and European Central Bank (ECB).
Fears of a full-scale Greek exit from the Eurozone are not as high as they were back in 2012, as Tspiras has made sure to calm fears that he sought to leave the single currency bloc. Most economists agree that the chances of a ‘Grexit’ are slim.
‘There’s still a lot of uncertainty, but you would presume that there will be some kind of compromise worked out between Greece and the EU eventually, but it’s going to take time. It’s apt to be a little volatile in both upward and downward directions for the Euro right now, as the market tries to find its feet,’ said Gregg Gribbs from Royal Bank of Scotland Plc.
Sterling is forecast to make gains in Tuesday’s session if the latest preliminary Gross Domestic Product (GDP) figures come in positively.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.1244 ,
Euro,,British Pound,0.7494 ,
Euro,,Australian Dollar,1.4241 ,
Euro,,Canadian Dollar,1.4030 ,
[/table]
