The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in a tight range later on Monday as the economic markets continued to digest news that the anti-austerity Syriza party won the Greek general election.
Earlier the Pound Sterling to Euro (GBP/EUR) exchange rate gave up some of its earlier gains as the single currency advanced on the back of speculation that the Greek election victory for the anti-austerity Syriza party will not prove to be a threat to the Eurozone.
The GBP/EUR exchange rate hit a session high of 1.346
The Euro regained some ground as economists raised their bets that an accord will be reached between the newly elected Syriza and Greece’s lenders the troika, which is comprised of the European Central Bank (ECB), European Union (EU) and International Monetary Fund (IMF).
Syriza was just two seats short of achieving a majority but successfully managed to convince the Independent Greeks party to join them in a coalition government.
‘Syriza’s win won’t be as bad for markets now as it could have been a few months ago. Tsipras is less aggressive and willing to negotiate. The result will affect sentiment on Greece, but in broader European context, it is just a blip. Markets are still in a risk-on mode and any news is dwarfed by the ECB stimulus programme,’ said Alessandro Bee, a strategist at Bank J Safra Sarasin AG in Zurich.
Tspiras has vowed to keep Greece inside the Eurozone as he attempts to get a better deal on Greek debt and eases budget constraints that were imposed in return for bailouts following the nation’s economic collapse. The main difficulty facing Tspiras will be to convince the Germans to ease off on their austerity demands.
German Confidence Rises
Also aiding the Euro on Monday was the release of data which showed that business confidence in Germany increased for a third consecutive month as declining energy prices and the anticipation of the ECB’s €1 trillion quantitative easing programme helped to lift optimism.
According to the Ifo institute, its business climate index rose to a reading of 106.7 in January from the 105.5 in December. Economists had been forecasting for a figure of 106.3.
‘Lower oil prices are conductive for the Euro area economy, and therefore also for Germany. Indicators suggest momentum will pick up, putting Germany ahead of the currency region once again,’ said an economist from BNP Paribas SA.
GBP/EUR Exchange Forecast
The Pound Sterling is forecast to advance against the Euro on Tuesday as the latest Gross Domestic Product (GDP) preliminary figures are expected to come in positively.
On an annual basis, the UK’s GDP is expected to have risen from 2.6% to 2.8%.
