Fresh Turmoil in Greece Weakens the Common Currency (EUR) Today
Pound Sterling (GBP) is making bullish advances on the Euro (EUR) today ahead of the Autumn Statement. While Chancellor George Osbourne is expected to announce further austerity measures in order to plug the £4 billion deficit in public finances, Pound Sterling has been able to appreciate following the news of a bomb blast at the business federation headquarters in Greece.
As one Greek crisis ends, another begins, with news that the conservative New Democracy party is in disarray after technical errors meant leadership elections couldn’t be held over the weekend. Anti-austerity party Syriza is currently in power with no opposition. In more bad news for Greece, anarchists set off a timed bomb outside the headquarters of the Greek business federation yesterday, prompting fears of further anti-austerity violence.
The GBP/EUR exchange rate is currently trending up 0.5% around 1.4231.
Earlier…
Mark Carney, Governor of the Bank of England (BoE), has today delivered more dovish comments which have strengthened predictions from economists that the next interest rate hike won’t be until mid-2016 at the earliest. As the Pound (GBP) softens, the Euro (EUR) has surged ahead, buoyed by news of economic growth in the Eurozone.
GBP/EUR Exchange Rate Forecast: Sterling Slumps as Carney Delivers more Dovish Remarks
Mark Carney and other members of the Monetary Policy Committee (MPC) have been testifying to lawmakers today over their Inflation Report, released on the November 5th ‘Super Thursday’. Comments made by the policymakers show a greater divergence of opinion than the last meeting’s 8-1 vote against an interest rate hike might have suggested.
Chief Economist Andy Haldane has caused a stir with his ‘thought experiment’ regarding the possibility of abolishing cash in order to impose negative interest rates, with many of the questions from MPs and journalists focussing on the topic. Carney was forced to clarify that the MPC had no intention of implementing anything outlined in Haldane’s paper.
Haldane continues his role as the MPC’s most dovish member, suggesting that the next action by the MPC could even be a rate cut. Carney and external MPC member Kristin Forbes disagree. ‘Given the state of the UK economy, a solid recovery, I still believe certainly the next move in interest rates will be up, we will not require loosening,’ Forbes stated.
However, rates may not rise significantly, with Carney warning that ‘even with limited and gradual rate increases it still will be a relatively low interest rate environment.’
As a result, the Pound has slumped across the board, losing ground to all currencies except the Turkish Lira (TRY), which has fallen after news that Turkish fighter jets shot down a Russian warplane over Turkey’s airspace.
The GBP/EUR exchange rate has slumped to 1.4164.
EUR/GBP Exchange Rate News: Bullish Euro After Positive IFO German Sentiment Releases
Yesterday saw the Euro uptrend on the back of positive PMIs for Germany and the Eurozone, all of which showed a greater-than-expected rate of growth. The Germany Composite index rose from 52.1 to 52.6 while the Eurozone Composite rose from 52.3 to 52.8.
The Euro’s charge turned bullish today after the release of positive economic data from Germany. Gross Domestic Product figures showed that the rate of growth remained steady at a non-seasonally adjusted rate of 1.8% and sentiment surveys by the Institute of Economic Research (IFO) showed increased optimism towards current and future business climates.
In more mixed news for the common currency, the crisis regarding Greek bailout conditions has been formally resolved, with the European Stability Mechanism (ESM) clearing the country to receive the next €2 billion payment after the Greek government agreed to implement new austerity measures. While good news in the short term, the threat from Greece has not been lain to rest: passing the austerity measures has seen the opposition in parliament increase, with the government’s majority dropping from five seats to just three.
The EUR/GBP exchange rate is currently up 0.6% and trading between 0.7013 and 0.7080.
GBP/EUR Exchange Rate Forecast: Sterling Could Trend Lower Until Friday’s GDP Figures
Previous dovishness from an MPC member has usually been met with a slump in demand for Pound Sterling as investors doubt the chances of an interest rate hike. The fallout from these latest comments could keep the GBP/EUR exchange rate low until Friday, when UK GDP figures will be released and a positive result could strengthen Pound Sterling.
The GBP/EUR exchange rate is currently trading between 1.4112 and 1.4254.
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