Greece talks continue

25 June, 2015

Matthew Boyle

Tell me more, tell me more, did they get very far? In a week with little economic data, many of you reading this will have read much already about the Greek situation, however it remains the main focus currently and the driving force for many of the major pairings in the currency market. Yesterday was much of the same as GBP/EUR rates continued to bounce up and down within a tight range, as everyone continues to speculate over the outcome of the ongoing talks. International creditors demanded changes to Tspiras tax and reform proposals, adding further uncertainty as to whether or not an agreement will be reached and if they will avoid defaulting on their debt payment of 1.6 billion Euros due to the IMF on the 30th June.

German finance minster Martin Jaeger said yesterday that they were “a long way from a breakthrough” suggesting that the IMF have made “generous concessions” and once again the ball is back in the Greeks court. In what is fast becoming the best rally seen since Nadal vs Djokovic in the 2011 US open final…… the back and forth continues.

What is important to note and crucial though is that the discussions are still ongoing. Whilst it would seem an agreement is difficult to reach, many would suggest as per French Prime minister Hollandes comments earlier this week that an agreement “must be reached”.

Aside from the economic impact of Greece leaving it would also send a message that membership of the Eurozone and the Euro is not irrevocable, as it founders intended. As such certainly the IMF and ECB will be keen to avoid default, albeit they will not want to simply concede to Greek demands.

Imagine having a credit card and not being able to make the repayment, with the only person able to lend you the money to repay the debt the very person you owe the money to – the bank. Albeit they will not want to willingly give more money to a bad creditor, at the same time they will not want to simply write off the debt as they get nothing. Furthermore it sets a precedent and sends somewhat of a message to anyone else using the same bank – you can’t pay, and it’s ok.

If Greece miss this payment it could trigger a run on the banks, capitol controls and potentially an exit from the Eurozone and Euro. So don’t be surprised if this situation plays on until the n’th hour before a last minute agreement is tabled, with the market continuing to act as it has done in the interim – up and down.

Take note though should an agreement be reached, no matter the concessions from either side we will likely see rates snap back to the levels we saw a fortnight ago, a drop by perhaps by 3-4 cents. In real terms For those of you sending 100k GBP abroad this could see your cost rise by around 3k GBP. Given where the rates are currently and if you agree that Greece cannot leave you might like to consider securing currency now as no doubt as the 30th approaches, volatility will increase and so too the potential for rates to drop fast.

Speak to your Currency Index broker today who can assist you with your transfer and should you like to secure a rate can provide you with a forward contract – a fantastic way to secure currency now with a small deposit, taking away the fear of rates dropping and giving you that added security should you need to send money overseas for a property purchase or invoice.