Euro weakens as Greek crisis continues

Pound/Euro rates were trading as high as €1.43 this morning when European markets opened, due to the mess that is the Greek debt crisis. When markets opened the Euro gained back some of its losses, and at the time of writing GBP/EUR is around the €1.41 mark. Let’s take a look at what’s been going on.

Greece fails to agree to bailout deal 

It now looks almost certain that Greece will miss its debt repayment to the IMF tomorrow. The European Central bank have stopped its emergency lending that was keeping the Greek banks afloat, after Greece announced at the weekend that it would hold a referendum on their bailout terms, and this referendum is next Sunday. Greek banks are now closed, and they have implemented capital controls, meaning that people there are limited to taking out only €60.00 per day. 

Last week, talks between Greece and the Eurozone countries over bailout terms ended without an agreement, and Prime Minister Alexis Tsipras then called for a referendum on the issue to be held on 5 July. Until then, the Euro is in a complete mess. They may well agree to the deal, and this will simply kick the can further down the road as negotiations begin again. 

The reason the Euro hasn’t fallen further than it has is because there is still a feeling within financial markets that a deal can be done here to keep Greece very much within the European Union. It’s in everyone’s interest to make a deal, especially Greece. However until the referendum is held, there will be huge uncertainty that is likely to reflected in very volatile trading in the Euro. 

Are you worried about how the Greek crisis may affect exchange rates? 

If you need to buy or sell Euros, then the coming week will be an incredibly volatile one for exchange rates. If you need to buy Euros, or perhaps convert Euros back to Sterling, then the current market volatility and lack of liquidity could make huge differences to the exchange rate. 

If you have a currency transaction to perform, then feel free to get in touch with me to discuss how the exchange rate could be affected and the options you can consider to protect yourself against a very choppy currency market. I can also provide a quote on your exchange to compare with your bank or existing broker. 

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Why has Pound fallen against Euro June 2015?

Tuesday 2nd June 2015
This morning we have seen GBP/EUR rates plummet, with the currency pair falling by 2.5 cents from €1.3950 this morning, to €1.37 at the time of writing:

What has caused the drop? 

The reason for the drop was a strengthening Euro. Earlier today we saw the latest EU inflation numbers, and these showed that inflation in the Eurozone turned positive in May after five months of negativity, and this revives hopes of an economic recovery in Europe. Earlier this year, the European Central bank embarked on a huge €1.1 trillion Quantitative Easing, or money printing programme in an attempt to stimulate the Eurozone economy, and the figures today suggest that this is working. That is why the Euro gained strength and has become more expensive to buy. 

Meanwhile in Greece… 

Also today there may have been developments in Greece. Their Prime Minister Alexis Tsipras has said that he has issued "a realistic proposal" to its international creditors in an attempt to secure a deal over its debts. "We have submitted a realistic plan for Greece to exit the crisis," he said. The problem is, we don’t know what this plan actually entails! International Monetary Fund chief Christine Lagarde and ECB president Mario Draghi are at a meeting between German Chancellor Angela Merkel and France's Francois Hollande discussing the issue at the moment, and their attendance shows how serious these talks are. 

If they really have made a plan that might be accepted, expect the Euro to gain further strength in the coming days pushing rates even lower. If however his plans come to nothing, then the uncertainty about what will happen with Greece will remain, and this could weaken the Euro and cause rates to recover 

Worried about Pound/Euro exchange rates? 

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Pound/Euro exchange rates May/June 2015

Tuesday 19th May 2015
Sterling/Euro rates continue to remain pretty volatile, and in the last 24 hours we have seen the pair rise from €1.3730 to nearly €1.40, which was due to weakness in the Euro. The gains didn’t last long however, and UK inflation figures this morning have weakened the Pound and knocked the rate down a cent, to around €1.3850 as the chart below shows. 

In today’s report I’ll explain what has caused the movements for Pound/Euro rates, and look at where the GBP/EUR exchange rate may move in May & June 2015. 

Euro weakness causes GBP/EUR to rise to nearly €1.40 

Greece has another large debt repayment to make on the 5th of June. Whether they will make it or not is having a big impact on the value of the Euro. The IMF think they don’t have much chance of meeting the payment, and their acknowledgement of this yesterday caused the Euro to weaken, pushing GBP/EUR rates up from 1.3750 to 1.3850. 

The weakness in the Euro continued this morning when European Central Bank officials said the bank could take further action, and pump even more money into the economy than they are doing already, in order to quash euro zone bond yields and boost inflation. If they increase their QE program and the amount of Euros their pumping in, then it will weaken the Euro. More of anything means it’s worth less, and that was the reason for this morning’s GBP/EUR push up to almost €1.40. 

UK inflation figures pull rates back down 

The rates only got to this level for 20 minutes or so, and then the UK released its latest inflation numbers. This showed that inflation turned negative for the first time in over 50 years. So why did this cause the Pound to drop? It’s because of interest rates. With inflation negative, there is no chance of a rate hike anytime soon. Because rates are going to stay low for a long time to come, there is little incentive for investors to buy the Pound, so that’s why the rate dropped back away. 

Where next for Sterling/Euro rates 

You can see from the chart that there is a steady line of support and resistance at around the €1.3850 market where it keeps settling back down. I think that whether the GBP/EUR rate goes up or down depends on what Greece is expected to do. Quite simply, if they don’t make their next payment or it looks like they won’t, the Euro could weaken further and push rates back towards €1.40. This is a key technical level so unless anything else unexpected happens I don’t think it will break through this. 

Alternatively the Greeks could just be delaying in order to re-negotiate the deal they are getting. If payments are made or an agreement is put in place, then the Euro could gain strength, pulling rates back down again as the single currency becomes more expensive to buy. 

Getting the best exchange rates 

Rates are very volatile at the moment, moving very quickly. In order to get the best possible rates you need to have a good currency broker who can monitor the market for you, explain the options you can consider on when to fix a rate, and get you a much better rate than banks will offer. The worst thing you can do is just watch the rate and hope itwill move your way, or use the bank to convert your funds. 

Why not give me a try? The rates and service I provide are exceptional, and with over 10 years’ experience helping personal and business customers with their currency requirements, it may be prudent to see if I can do the same for you. Send me a free no obligation enquiry today by clicking below. 

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