GBP-EUR Rates hit 1.41!! Lack of confidence in Greek bailout (Joshua Privett)

The consensus among the markets has been that once a Greek deal (agreekment) has been reached, the rates would plummet – as they have in the past. Just over a month ago, GBP-EUR rates fell by 6 cents in 7 trading days for that reason.

So why is this time different? The answer is two-fold. First, Market sentiment has changed about the benefits of keeping Greece in the Eurozone. The true state of the Greek crisis and long-term future has been laid bare. Is the Euro as a whole more stable by keeping on an unstable Greece? But if this deal is accepted this issue at the least will not be resurfacing for a few years. The amount of investors taking positions that long on the Euro are minimal, and thus must only account for less than half a cent of today’s movement.

The second point, is that this offer has not yet been accepted by the Greek Parliament. The terms they have to stomach are essentially everything that the Greek people rejected during their bailout – they have simply added a larger price tag of 85bn€ to do so. So it seems markets are not confident that this will be smoothly accepted, particularly since Greece’s Defence Minister, Panos Kammenos, already stated he would reject the bailout in its current state.

So it seems a deal is tentative, and the uncertainty in the markets is what has driven the rates higher after initial hints of an agreement had brought them down to 1.38. If the deal is reached in some form, which I believe is more likely due to Greece’s current cash crisis, we can expect similar movements further down. Call 01494 787 478 and ask for Joshua for a live quote on your transfer, while the Greek crisis is still in effect and is pushing these rates close to 8 year highs. [email protected]