Gains Forecast for GBP EUR Pound Sterling Euro Exchange Rate on Greece / Russia Fears

April 8, 2015 - Written by John Cameron

STORY LINK Gains Forecast for GBP EUR Pound Sterling Euro Exchange Rate on Greece / Russia Fears

The euro (currency:EUR) slumped in the global currency markets during today’s session. The shared currency came under selling pressure thanks to increased nervousness from investors regarding the Greek debt situation following the revelation that Greek Prime Minister Alexis Tsipras is in Russia and holding talks with Russia’s President Vladimir Putin.

Greece’s awkward debt talks with the EU / IMF / ECB Troika are ongoing and although the Athens administration is fully expected to meet today’s debt deadline for its latest repayment to the IMF, experts warn that if these discussions do not begin to yield fruit rapidly then Greece may be facing all-out bankruptcy by the middle part of the year.

One alternative to Greece acquiescing to further stringent austerity measures would be to find an alternative source of funding. Some analysts have floated China as a potential source of bail-out money for the Athens administration, while others have suggested that Moscow might be willing to stump up funding in order to gain a strategic interest in the European Union. Such a move by Greece would be viewed as a direct threat the euroland project and would be likely to see support for the single currency slump.

Comments from Russian President Vladimir Putin earlier today emphatically denying that Prime Minister Tsipras requested financial assistance from Moscow during today’s meeting are unlikely to allay fears that Russia is about to heavily step on the European Union’s feet. Tsipras’s calls for the European Union and other Western nations to end their ‘vicious cycle of sanctions’ against Moscow which have followed Russia’s support for anti-Kiev rebels in Eastern Ukraine provide a heavy hint that the new left-wing leadership in Athens is minded to side with Moscow. Meanwhile, Vladimir Putin’s assertion that he had been discussing, ‘various ways of cooperating, including major projects in energy’, with his Greek counterpart hint at ever-closer ties between the two nations.

The prospect of Greece drifting away from the European Union and into the arms of Moscow sent the Pound Sterling euro exchange rate up to within 10 pips of its 3-week zenith. The pair peaked at an intraday high of 1.3836 GBP EUR just after the New York opening bell and analysts forecast that there could be further gains to come for the pair if Greece continues to agitate.

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