No Eurozone progress for Greece

8 July, 2015

Robin Haynes

The Pound continued to lack any real momentum against the Euro in trading yesterday, as the Greek/Eurozone impasse was maintained. There were no new announcements or concrete proposals from Greece, which is now relying on assistance from the ECB to avoid seeing its banks run out of money within days. The evening summit ended with European leaders giving Greece until tomorrow to present new proposals on debt restructuring and tax, welfare and growth reforms, with another Euro summit due on Sunday to decide on the fate of a nation’s economy.

Donald Tusk, European Council President, said “the final deadline is this week”, and that we face the most critical few days in the history of the single currency bloc.

If the Greeks are playing a dangerous game, the rest of Europe is also shackled by political pressure (German Chancellor Merkel faces staunch opposition in her own parliament to helping Greece any further) and the sheer logistics of forging an agreement to extend Greece’s credit lines in time to avert disaster.

Surely then we are currently seeing the calm before the storm for exchange rates. A last-minute deal for Greece to return to liquidity would hardly add credibility to the European project, which could give us a cheaper Euro, but conversely there is a growing acceptance that Greece leaving the single currency (the Bavarian finance minister has simply stated that he wants to see Greece thrown out) might not be the worst long term solution either. Would the Euro gain in value by losing its weakest member? We may be about to find out.

So the volatility we expected this week has so far failed to materialise for the Euro, leaving us with historically very good rates for those of you sending money to Portugal, France, Spain or elsewhere. What will happen next is really anyone’s guess, but we will know more before the weekend is over, so with time running out and extreme uncertainty ahead, do consider fixing your rate now if you’d rather avoid the forthcoming turbulence and risk.

UK Budget today

George Osborne gives the first Budget in front of a Conservative majority in the Commons since November 1996 today. The ‘emergency’ budget after the election already contained many of the changes the government wanted to make, and the main news today is likely to be a more detailed account of the £12bn of welfare cuts that the government has already warned us about. While the headlines may paint doom and gloom for those affected by the cuts, the economy overall might be a winner and if markets react well we could see the Pound take some strength at lunch time today.

For those of you buying or selling US Dollars, the Greenback strengthened yesterday, sending rates for buying USD to their lowest for a month. This evening we have the minutes of the latest Federal Reserve meeting, which will give us clues as to whether the Fed are likely to start raising interest rates sooner rather than later, and may send the Dollar up in price further still.

The Pound has started today on the back foot, with rates for buying Euros and Dollars both dropping around 0.5% in early European trading.