The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the 1.35 region on Monday, as market attention remained focused on the Greek situation.
The GBP/EUR exchange rate hit a session high of 1.357
At the end of last week the Euro recovered losses as a deal was reached between the Greek government and its European creditors. The deal will see the nation’s current bailout be extended for four months. Despite the deal being agreed to last week, it is not yet complete, as Athens has to present a list of reforms, which need to be approved. If the reforms offered are not up to scratch then there is a chance the deal could be rejected, something that is keeping investors nervous.
Despite the concerns, the German bank Berenberg has reduced the chances of a Greek exit from the Eurozone.
‘The risk of Grexit falls from 35% to 25%; the chance that prime minister Tsipras completes his required Uturn and stays the reform course rises from 45% to 50%. The probability that his double-populist government falls apart to make way for a less populist and more pro-European government rises from 20% to 25%. The risk of immediate capital controls in Greece has receded,’ said chief economist Dr Holger Schmieding.
With the neo-nazi, Golden Dawn coming in third place in the recent elections the bank’s predictions had best be right and that they do not take power.
The Syriza led government is now under pressure from its supporters who are likely to be angry that it has gone back on its word by accepting a bailout extension and accepting all conditions attached to it.
German Data Weighs on Euro Exchange Rate
Also putting the single currency under pressure was the release of the latest business confidence data out of Germany. The Euro wobbled after the data compiled by German research institute Ifo showed that its Business Climate Index came in below market expectations.
Despite missing forecasts, the index rose to a seasonally adjusted figure of 106.8 this month, an improvement on January’s figure of 106.7, the highest level in seven months. Economists had been expecting a figure of 107.7.
The Current Assessment Index fell from 111.7 to 111.3, missing forecasts for a figure of 112.7. The Business Expectations Index also came in below forecasts.
Sentiment is forecast to improve over the coming months however as the European Central Bank will begin it €1.14 trillion quantitative easing programme in March.
A lack of market moving UK data could see the Pound experience light trade.
