Gains Forecast for GBP EUR Exchange Rate on Greece / Russia Pipeline Fears

April 22, 2015 - Written by John Cameron

STORY LINK Gains Forecast for GBP EUR Exchange Rate on Greece / Russia Pipeline Fears

Geo-political risk events shaped movement in the global currency markets during yesterday’s session.

As the day’s trading got underway, news emerged from Greece which is likely to have sent a shudder down the spines of the euroland’s policymakers. The Chief Executive Officer of Russian Oil and Gas Giant Gazprom was in Athens, meeting with the nation’s leaders. Alexei Miler of Gazprom met Greece’s Prime Minister Alexis Tsipras yesterday afternoon amidst market whispers suggesting that they held discussions regarding the potential construction of a new gas pipeline through Greece. Insiders stated yesterday that the use of Greek sovereign territory for part of the so-called ‘Turkish Stream’ gas pipeline could be worth up to €5bn to the Athens government – a lump of cash which could come in useful in shoring-up the debt-addled Hellenic state’s broken finances.
The suggestion that Athens might be willing to accept Moscow’s billions hit the single currency hard on the day. Analysts took the news as a sign that the hard-line Syriza government is considering alternate sources of funding, making a Greek exit from the eurozone a more likely prospect. Analysts forecast that such an outcome would plunge the global markets into turmoil and would have the additional effect of causing a major run on the euro (currency:EUR).

Looking ahead, the main events during today’s session come in the form of this afternoon’s whole of eurozone Consumer Confidence survey which is closely-followed by the latest set of US Existing Home Sales figures. Yesterday’s disappointing showing from the closely-monitored German ZEW Confidence Survey does not bode well for the whole of euroland appraisal. A showing of below the anticipated -2.5 print would provoke renewed selling pressure on the single currency. Meanwhile, a strong set of US housing data would increase market babble concerning a June interest rate hike from the Federal Reserve. The fall-out from this would see the US Dollar (currency:USD) register sustained gains against the euro, potentially sending the EUR USD exchange rate back down towards its multi-year low of 1.0463 which it touched off during the middle part of last month.

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