Pound tumbles against Euro

Yesterday we saw the Pound fall over 1.5% against the Euro, as the Greek Prime Minister announced a snap election and UK retail sales figures came out slightly lower than forecast.

In Greece, some Syriza MPs have announced they will form a break-away anti-austerity party, but in reality Mr Tsipras’ majority had already effectively disappeared and the election is very likely to be won by pro-bailout pro-austerity parties with no credible alternative. This is seen as good news for the Eurozone, as it will keep Greece firmly at the lap of Germany and the rest of its creditors, and the single currency gained in value throughout trading yesterday as rumours of the election were confirmed on state TV in Greece towards the end of the day.

Meanwhile the Pound was not helped by UK retail sales which were a little lower than expected at 4.2% growth for the year to July. The Pound seems very sensitive to all data releases at the moment, given the speculation on when the Bank of England will first raise interest rates.

One currency which was kept cheap in the volatility yesterday was the US Dollar, as the chances of an interest rate rise in the States were knocked by lower inflation figures earlier in the week.

The day ahead

We have a relatively quiet day today with only public sector borrowing of interest in the UK (9.30am) and Canadian inflation at 1.30pm. Some components of Eurozone GDP are also announced at 9am (services and manufacturing). With rates for sending money abroad still looking extremely attractive for most currencies, do consider locking in a rate before politicians, bankers and economists return from the summer break en masse in the next couple of weeks. The autumn is likely to be all about interest rate rises, and with UK ecostats looking a little shaky any delay in the Bank of England’s decision will hurt the Pound, while the Dollar would become more expensive if the Federal Reserve raises first; and the Euro is likely to gain value if the Greek debt crisis starts to fade into memory.