Pound to Euro Approaches Fresh 7 1/2 Year Exchange Rate Best

March 9, 2015 - Written by John Cameron

STORY LINK Pound to Euro Approaches Fresh 7 1/2 Year Exchange Rate Best

The Pound Sterling euro exchange rate spiked to 1.3919 GBP EUR earlier today following an increase in investors’ fear levels regarding the ‘Greece Problem’. Market participants turned their backs on the single currency following comments from Greek Finance Minister Yanis Varoufakis in the lead-up to today’s eurogroup meeting of regional Finance Ministers in Brussels.

The significant words from Varoufakis involved the possibility of a referendum being held in the debt-addled Hellenic state. When the shaven-headed money man was asked during a newspaper interview what his nation’s options were if the eurogroup failed to accept Greece’s debt reforms, he responded that, ‘if needed, if we encounter implacability, we will resort to the Greek people either through elections or a referendum.’ The potential for an in/out public ballot on Greece’s continued membership of the euroland hit the single currency hard and the GBP EUR exchange rate jumped as a consequence.

However, the fact that GBP EUR has, so far at least, remained below last Friday’s 7 ½ year peak of 1.3925 provided some hope for Britons selling their properties in Spain, France and Italy, that the pair may have topped out. On the other side of the coin, many leading analysts are forecasting that, with Quantitative Easing only beginning in the euroland this week and with the European Central Bank committed to continue the €60bn programme until Autumn 2016 at least, there could be further sustained losses to come for the euro.

Meanwhile, there was another piece of euro-negative news earlier today when January’s German Trade Balance numbers were published first thing today. Analysts had been expecting the closely-monitored figures to reveal a trade surplus of €19.5bn in the euroland’s premier economy; the showing of €15.9bn therefore came as a significant disappointment. Even a significantly better than anticipated whole of eurozone Sentix investor confidence survey, published at 0930hrs GMT was not enough to prop-up the euro on the day.

Looking ahead, market highlights for the next 24hrs include Chinese New Yuan Loans figures and CPI inflation data, due for release overnight. A strong print from both of these figures would be likely to see the Pound Sterling record fresh losses against the New Zealand Dollar (currency:NZD) and the Australian Dollar (currency:AUD).

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