This weekend the Greek people voted against the terms of their latest bailout proposal. 61% voted against it, and 39% voted to accept it. The reaction on the currency markets has been surprisingly muted. Greece's finance minister, who often clashed with creditors, has resigned. Varoufakis was seen as a major obstacle in negotiations and now that he has stepped down the possibility of a last minute deal to keep Athens in the Eurozone may have increased, and this could be a reason that the Euro hasn’t weakened more.
What does all this mean for Pound/Euro exchange rates?
Over the weekend we saw some weakness in the Euro on the Asian markets, with GBP/EUR rising to nearly 1.42. However as soon as European markets opened this morning, prices had corrected to €1.4050, so little change from where we were last week.
Actually nothing has really changes. Greece will now go back to the negotiating table to try to strike a deal to re-structure Greek debt. Something needs to be done as without emergency assistance from the European Central Bank, Greek banks are going to run out of money within a few days, so despite the Greek people voting against Austerity, if they want their economy to survive then they still need to make a deal with their creditors.
With the referendum out of the way, talks can resume and things are back to where they were a week ago. However while the market seems stable at the moment, the Euro could be vulnerable to selling on the market, so as the saga continues, we could see the Euro weaken further. At the moment however it seems a deal could be still be done. If it is, expect GBP/EUR to drop. If it isn’t, expect rates to remain firmly above 1.40. So all in all nothing has really changed!
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