GBP EUR Exchange Rate Stabilises as Greek GDP Disappoints

March 6, 2017 - Written by Ben Hughes

STORY LINK GBP EUR Exchange Rate Stabilises as Greek GDP Disappoints

The British Pound to Euro exchange rate continued to trend near its worst levels since mid-January on Tuesday afternoon despite mixed Eurozone ecostats.

Wednesday will see the UK Budget Statement being delivered by UK Chancellor of the Exchequer Philip Hammond. If Hammond surprises and impresses traders by revealing new infrastructure investment plans, the Pound could rally.

[Previously updated 07/03/2017]

The Pound Euro (GBP EUR) exchange rate held steady today as a shock contraction in Greek GDP shifted investor focus from Brexit.

Pound Euro (GBP EUR) Stable as Greece Economy Fails to Grow

The Euro’s attempts to advance against the Pound were short lived this morning following the release of a disappointing GDP report from Greece.

The weak link of the Eurozone continued to hinder the single currency as the beleaguered Greek economy failed to grow in 2016.

Figure show that Greece’s GDP dropped from 0.6% to -1.2% in the fourth quarter, its worse quarterly performance since 2015 during the height of the debt crisis.

While the Greek economy was expected to slow in 2016 the shock fall at the end of the prompted growth to plummet from 2% to -1.1% year on year, falling dramatically short of a 0.3% estimate.

The drop has also renewed fears about the state of the nation’s finances ahead of discussions with the European Stability Mechanism (ESM) for a fourth bailout that it requires to avoid defaulting on a €7bn debt repayment in July.

The data also contradicts Prime Minister Alexis Tsipras, who said earlier on Monday that;

‘They may want to delay negotiations on the technical level, but the river is not turning back. Greece has turned the page, the economy is faring better.’

Brexit Concerns Drag on Pound

The Pound struggled to capitalise on the weakness of the Euro however as markets become increasingly unsettled ahead of Theresa May’s plans to trigger Article 50 later this month.

With the PM reportedly hoping to begin the formal exit of the UK on the 15th of March investors are reluctant to trade in Sterling due to the uncertainty of the Brexit process.

This was also compounded by announcement that General Motors would be selling British Carmaker Vauxhall to the owners of Peugeot, PSA earlier this morning. Investors fear that Brexit could lead to up to 4500 job losses if the firm decides to relocate to avoid possible tariffs on parts produced in the EU.

Richard Gane, of supply chain firm Vendigital said;

‘While it is not yet definite that the plants will close, there is clearly concern that this could happen because in the case of the Astra, for example, around 75% of components are sourced from the EU and the vast majority of the vehicles made at Ellesmere Port are sold outside the UK.’

GBP EUR Exchange Rate Forecast: Eurozone GDP Ahead

The Pound may slide against the Euro in trading tomorrow with the release of latest Eurozone GDP estimate, with Q4 growth expected to have climbed from 0.3% to 0.4%, however with the large fall in Greece’s GDP there is a chance that it could miss its target.

Meanwhile a lull in UK data may make Sterling more liable to succumb to Brexit concerns.

Current Interbank Exchange Rates

At the time of writing the GBP EUR exchange rate was trending around 1.15 and the EUR GBP exchange rate was trending around 0.86.

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