The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by more than 0.60% as concerns over Greece dragged the single currency lower. The Pound Sterling to Polish Zloty (GBP/PLN) exchange rate surged more than 1.40% as Polish data disappointed.
The Pound Sterling to Euro (GBP/EUR) exchange rate hit a session high of 1.4027
The Euro weakened broadly against the majority of its most traded peers as investor jitters increased over the Greece situation.
Greece on the Brink
Leading members of the Greek government have warned that the nation is out of cash and will not be able to repay €305 million to the International Monetary Fund (IMF). The repayment is due on June 5. Worries are also mounting that Greek Prime Minister Alexis Tsipras could soon face a full-blown mutiny if he bows to pressure and offers concessions to the nation’s creditors.
‘If he can’t get the reform measures through parliament, and his people don’t vote for it, we will have a serious crisis. Failure to support it will bring up questions of implementation and the stability of the political system. I don’t think lenders are going to give up money if they think the government is going to fall,’ said Anna Assimakopoulou, shadow finance minister for the main opposition party New Democracy.
The comments came after credit ratings agency Moody’s raised its bets that the government could impose restrictions on Greek bank accounts in an attempt to stop capital flight. Moody’s added that the outlook for the Greek banking sector is negative due to a ‘significant deterioration in banks funding and liquidity’.
‘Moody’s notes that significant deposit outflows of more than €30 billion since December 2014 have increased banks’ dependence on central bank funding. In our view, the banks are likely to remain highly dependent on central bank funding, as ongoing uncertainty regarding Greece’s support programme continues to compromise depositors’ confidence,’ said Moody’s.
Last week a member of the Greek central bank warned that there would be ‘blood in the streets’ if such restrictions are imposed.
The Pound Sterling to Polish Zloty (GBP/PLN) exchange rate hit a session high of 5.7250
The Polish Zloty tumbled against its major peers after data released by the Polish Central Statistics Office showed that industrial production in the country grew less-than-forecast in April. The report showed that industrial production rose 2.3% a figure that was far lower than the 5.5% growth expected by economists.
Russian Threat
Also weighing on the Polish currency were worries over a possible escalation in the conflict in neighbouring Ukraine. NATO has stepped up its security measures, as worries remain high over a possible threat from Russia. Ukrainian president Petro Poroshenko added to those concerns as he said that his country was now in a ‘real war’ with Russia and that Ukrainians should prepare for a Russian attack, which could occur in the summer.
‘I think we should be ready and I think that we do not give them any tiny chance for provocation. That will totally be their responsibility,’ said Poroshenko in an interview with the BBC.
The Pound Sterling could make further gains against both the Euro and Polish Zloty if the latest UK retail sales come in positively.