Foreign Currency Market Update – GBP / EUR Update
The Pound Sterling (GBP) to Euro (EUR) exchange rate was treading water on Monday as investor jitters over the upcoming UK general election restrained Sterling and worries over a possible Greek default continued to weigh upon the single currency.
Last week the Pound managed to breach the 1.40 level as a meeting of Eurogroup finance ministers ended with no deal being reached between Athens and its creditors. According to reports, ministers were on the verge of losing patience with the left wing Syriza led Greek government.
The anti-austerity coalition government has been attempting to unlock aid since striking a deal to extend its bailout program in February. Frustration among investors has mounted as the government repeatedly expresses confidence that a deal is imminent, only to be rebuffed by Euro-area officials seeking concrete steps. Last Friday’s meeting was no different: Finance Minister Yanis Varoufakis said that views were converging but his counterparts across the region criticised him heavily.
Until a deal is reached, the indebted nation will not receive the final tranche of much needed bailout funds. This week, Greece looks set to struggle to pay its pensioners and employees. So far, the government has failed to present an acceptable plan to revamp its economy.
The Euro is expected to remain under pressure throughout the week but could experience volatility midweek due to the publication of Eurozone sentiment and confidence reports. Economists are forecasting that Eurozone business confidence and consumer confidence softened in April due to the uncertainty caused by the Greek situation. Also of interest in Wednesday’s session will be preliminary German inflation data, which is expected to have softened on a monthly basis but inched higher on a yearly basis.
The main event for the Euro this week will be Thursday’s Eurozone inflation and unemployment data. The regions jobless rate is forecast to have dropped from the 11.3% seen in February to 11.2% in March.
Strong gains for the Pound Sterling are unlikely this week due to the growing uncertainty over the outcome of the rapidly approaching UK general election. With just ten days to go until voting day, the result remains a mystery. The latest polls continue to show that the Labour and Conservative parties are neck-and-neck and that neither side will win enough support to form a majority government. Uncertainty also remains over the impacts that political parties such as the SNP and UKIP will have on the result.
The Pound Sterling to Euro exchange rate was trading in the region of 1.3964
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