Spectre of Grexit continues to haunt Eurozone

Greek face-off with EU helps boost sterling

The currency markets are alive once again as Greece continues to play poker with their creditors, BoE governor Mark Carney makes another speech addressing the UK’s inflationary battle and central banks globally attempt to contend with geopolitical headwinds.

Sterling had one of its most bullish days in recent weeks yesterday, after market participants decided to latch on to the positives from Carney’s quarterly inflation press conference and discount his warnings that UK prices could flirt with deflation during the spring, thanks to the drop in oil prices and deflationary issues in the eurozone.

So why did the pound rise?

Weaker inflation predictions should have hurt sterling pairs, as it pushes back the chance of an interest rate rise. However, Carney went on to point out that the poorer inflation figures were the only fly in the ointment for an otherwise improved economic outlook.

We were reassured that prices ought to rebound by the end of the year and that wage inflation, one of the key indicators the Bank of England have been keeping an eye on, was improving.  These comments had an immediate impact during the middle of the London trading session, with the pound’s rise making it over £600 cheaper to buy $100,000 within a matter of minutes.

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What about the euro?

The single currency continues to be the markets’ main area of focus, as the ongoing Greek debt negotiations have the potential to reshape the currency bloc.  The Syriza party have been resolute in their mission to ease the austerity measures imposed on Greece as a condition of their financial aid.

The bargaining went on for six hours yesterday without conclusion, though the new Greek Finance Minister, Yanis Varoufakis, did claim that they understood each other much better than they had in the morning.  Whether this is actually a hint at progress or whether Mr Varoufakis has simply become acquainted with the vague language of politics, only time will tell!

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Should the Troika acquiesce to Greece’s demands, it will pave the way for further disruption in Europe as nations like Spain and Italy are likely to follow suit and demand concessions from their creditors.  There is the potential for significant volatility here, as any news could have a profound effect on euro currency pairs.

Whilst it might seem as though the euro is destined to weaken against currencies like the pound, it’s worth bearing in mind the potential pitfalls of making such an assumption.  If the pound behaves the way it did during the Scottish referendum during the upcoming general election campaign, then those exchanging pounds could be in for a painful few weeks.  Conversely, any positive news from the Greek talks could ease the strain on the euro, making it more expensive to buy.

Stay in touch

Given the current volatility on the currency markets, it’s important to stay in touch with a dedicated account manager here at Foremost Currency so you can understand your options.  An effective plan is the best way to prepare yourself to take advantage of any positive movement, whilst protecting yourself from any downside risk.  One of our experienced specialists can help design one tailored to your requirements.

If you don’t have an account with Foremost Currency then click here to open one today.  Alternatively contact me on the details below to discuss your requirements in more detail.

 

Joe Mayhew

Currency Broker

+44 (0)1442 892060

[email protected]