Wednesday, 27 May 2015

Will GBP/EUR go up or down in June 2015?

Wednesday 27th May 2015 
Sterling/Euro has been holding firm well above the €1.40 mark so far this week, on continued concerns Greece may not be able to make its next debt payments. However this may not last for long, as there are indications Greece are about to strike a bail out deal.

The Greeks have 4 different loans to repay in the next 4 weeks, totalling around €1.6 billion. One payment of €300 million is due in 1 week. There has been talk that they could avoid paying back the IMF next week, lump it all together and make one large payment at the end of June, however they still have to negotiate the funding to do this, which is keeping the Euro weak. 

For most of today and yesterday, GBP/EUR was sat at a 3 month high, and only 1 cent below the best it’s been in 8 years. However the rate has been sliding this afternoon, after Greek Prime minister Alexis Tsipras said his government was "close" to a deal after reports the two sides had begun the process of drafting an agreement. 

"We have made many steps. We are on the final stretch towards a positive deal," said Mr Tsipras, without revealing the details of the terms. The Queen’s speech this afternoon also weakened the Pound, pulling exchange rates lower as it outlined the UK referendum on an EU exit. As you can see from the chart below, the exchange rate has dropped by cent, however still remains supported above €1.40, for now: 



Will Pound/Euro go up or down in June2015? 


On the one hand, if it looks like that Greece will be unable to make it’s debt payments, expect rates to remain firmly above €1.40. On the other hand, if they make a deal with it’s creditors that now seems quite likely, the Euro could very quickly regain some strength and pull rates back below €1.40 very quickly indeed. 

Should the Greek situation be resolved, then it’s also likely focus will turn to a possible UK exit from the Eurozone. Many say that should this be a possibility, then there are real risks to the UK economy. This is because our economy here in the UK really relies on inflows of investment and this would likely be diminished should there be uncertainty about us remaining within the EU. 

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