Friday, 3 July 2015

How could Euro react to the Greek referendum?

Friday 3rd July 2015
Regular readers of my blog will be well aware that most moves in Sterling/Euro of late have been due to the ongoing problems in Greece. The failure to meet their debt payments and the ongoing negotiations have weakened the Euro significantly in the last few months, resulting in a cheap single currency. In fact the current GBP/EUR is very close to the best it’s been in 8 years. Below is a chart showing the exchange rate over the last 3 months. As you can see, it's risen to €1.40 several times before dropping back away again:

 

What’s happening this weekend? 


The Greek people are voting on a referendum called by the Greek government, on whether they support the bailout offer, in terms of further international loans. This follows months of tough talks with creditors. 

Currently all support to Greece has been stopped, and the banks are likely to run out of cash on Monday. You can read more about this here on the BBC website.  EU leaders have warned that a "No" vote could see Greece leave the Eurozone. 

What if Greece votes ‘No’? 


This would mean them rejecting the bailout plans, and the Euro could well weaken pushing Pound/Euro rates higher. Some say this would mean Greece leaving the Euro. Actually, there is currently no mechanism for them to do so, as it simply wasn’t envisaged when the Euro was created! Even if they decided to leave the Euro tomorrow, it would take months for the EU to work out how to do this in practice. A no vote though would mean back to square one, and negotiations would start again. I do think however that a No vote will keep Pound/Euro firmly above 1.40 and we could possibly see rates climb even higher. 

What if Greece votes ‘Yes’? 


This would be a blow to the Greek government. It would in no way resolve the problems, as all it would mean is that negotiations would start again. However, I think a Yes vote would strengthen the Euro, and pull GBP/EUR rates back below the 1.40 mark again. 

What does all this mean for Pound/Euro rates? 


This afternoon GBP/EUR has fallen as the latest polls suggest the Yes vote has a slight lead. This indicates that rates could tumble if the vote goes this way on Sunday. Personally, whichever way the vote goes on Sunday, I still firmly believe a deal will be done between Greece and its creditors, and when it does I would expect Sterling/Euro to drop sharply. 

It’s in everyone’s interest to do a deal especially Greece’s. If I needed Euros in 2015, I would give serious consideration to fixing a rate while it’s close to the best in 8 years. 

Do you need to get the best exchange rates? 


Regardless which currency you need to buy or sell, why not get in touch with me for a quotation, and to discuss the different tools I provide to protect you against adverse exchange rate movements. The rates I source are up to 5% better than banks and other brokers may offer, and it costs nothing to contact me for a free consultation and quote. 

I can also discuss your particular requirements, explain what may happen to exchange rates in the coming months, and explain the options you can consider so you can make an informed choice on how to proceed. 

Have a great weekend.