Near-Term Improvement Forecast for Pound Sterling Euro Exchange Rate GBP EUR

April 7, 2015 - Written by John Cameron

STORY LINK Near-Term Improvement Forecast for Pound Sterling Euro Exchange Rate GBP EUR

The Pound Sterling recorded good gains against the euro during today’s session. The GBP EUR exchange rate had been languishing only a few pips above its 6-week low of 1.3541 when this week’s trading got underway on Sunday night. However, the pair has steadily moved forward during the 48hrs which have followed, climbing to as high as 1.3728 during the middle part of today’s session as investors priced-in a potentially incendiary action from Greece’s hard-line left wing Syriza government.

The Greek government’s public claim earlier today that Germany owes the Hellenic state €279bn following the Nazi occupation during World War Two is likely to harden anti-Greek sentiment amongst the population of the Teutonic powerhouse. Greek Deputy Finance Minister Dimitris Mardas informed a Greek parliamentary committee earlier today that, ‘according to our calculations, the debt linked to German reparations is €278.7bn.’ Mardas stated that this sum included €10.3bn for repayment of a loan which the Nazis forced Greece’s central bank to pay during the occupation.

Analysts suggest that without a concrete debt agreement being reached by all parties, Greece will effectively be bankrupt by the middle part of the year. In the minds of investors, today’s public calculation by Greece’s policymakers makes such an agreement a more distant possibility. Commentators forecast that the shared currency may now experience renewed selling pressure as a result.

Some of the renewed move higher for GBP EUR on the day was attributable to technical factors – the pair had started the week resting just above a key level of technical support, so a renewed move higher was always on the cards. However, this morning’s UK tertiary sector data helped fuel the move; the latest Markit/CIPS Purchasing Managers’ Index survey revealed a sharp increase from February’s 56.7 to 58.9 last month. Third data release is always closely-monitored by dint of the fact that over three quarters of the total activity in the British economy takes place in the combined tertiary industries. Chris Williamson of Markit explained earlier that, ‘while the data support the view that the next move interest rates will be upward, the lack of inflationary pressures suggests the first hike remains some way off, and probably not this year unless we see some significant upturn in wage growth.’ Notwithstanding this view point, it appears likely that the near-term direction of travel for GBP EUR is now set to be Northwards.

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