Euro to Pound: Losses Forecast for EUR GBP Exchange Rate on Greece Debt Rumours

April 21, 2015 - Written by John Cameron

STORY LINK Euro to Pound: Losses Forecast for EUR GBP Exchange Rate on Greece Debt Rumours

Not for the first time in recent months, the ongoing debt woes of Greece have stolen the limelight in the global currency markets during today’s session.

The renewed move against the euro which ensued has sent the Pound Sterling euro exchange rate Northwards from yesterday’s low of 1.3839 to an intraday high of 1.3947 earlier today.

The move against the shared currency was driven by overnight reports that the European Central Bank (ECB) is considering reining in the level of Emergency Liquidity Assistance which it is currently providing to Greece’s stricken retail banks. The ECB has gradually stepped up the emergency line of credit which it provides to Greece’s banks since the hard-line Syriza government wrested power in Athens in January. The reports from an unnamed ECB insider suggest that if Friday’s deadline for Greece to produce a list of reforms passes without Athens satisfying the ‘Troika’, then the ECB may retaliate by giving the debt-addled Hellenic state’s banks a significant haircut.

Greek stock markets responded to the story by plunging to their lowest level since Syriza won January’s General Election. Meanwhile, the yield on Greece’s short term bonds shot up to their highest level since the most recent debt crisis peak of 2012. Athens is having to pay an untenable yield of almost 30% on its 2 and 3-year gilts. Something has got to give and many analysts forecast that the something will be the euro.

In other Greek news, local government leaders have responded angrily to the Athens administration’s ‘outrageous decision’ yesterday to sequester funds from the nation’s local councils in order to service national debt commitments. Greek Deputy Finance Dimitris Mardas was roundly criticised when he stated that the ‘internal loan’ would remain in place ‘for at least two months’. Meanwhile, Jeroen Dijsselbloem, the Head of the eurogroup, had stern words for Greece’s policymakers earlier, warning the markets that Greece’s money is ‘running out’ and forecasting that a Greek exit from the eurozone would lead to dangerous instability for Greece and for Europe as a whole.

Technical analysts forecast that the GBP EUR exchange rate needs to post consecutive closes above its most recent peak of 1.3959 in order to confirm that it has started out on a fresh near-term uptrend.

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