- UK currency weakened by doom-laden report for ‘Brexit’ scenario
- Lengthy Treasury document likely to increase volatility as June 23rd vote approaches
- Euro strengthened on possibility of Greek debt relief agreement
- Eurozone economic surveys could weaken EUR tomorrow morning
The Pound Sterling (GBP) has been an unstable bet for investors today, with losses primarily stemming from a recent report published by the UK Treasury over the potential outcome of a UK exit from the EU.
In the case of the Euro (EUR), the single currency has managed to appreciate on the fact that a desirable outcome to the current tension over Greece’s debt repayment situation may be found this week.
UK Economic News: Shortage of Direct UK Data leaves Recent ‘Brexit’ Forecast in Full Focus
As with last week, the Pound (GBP) has generally fared poorly against its various peers today, with losses coming in the form of drops of -0.3% against the Euro (GBP/EUR) and the New Zealand Dollar (GBP/NZD), -0.4% against the Swiss Franc (GBP/CHF) and -0.5% against the Omani Rial (GBP/OMR) and the Qatari Rial (GBP/QAR). On the plus side, the Pound has managed to advance by 0.4% against the Canadian Dollar (GBP/CAD) and the Mexican Peso (GBP/MXN) and a far greater 1.8% against the Russian Ruble (GBP/RUB).
The principle factor limiting the gains of the Pound today has been a report released by the Treasury. The document contains several dovish predictions regarding the fallout from a ‘Leave’ vote on June 23rd, with Chancellor George Osborne summarising that the nation can expect to be ‘permanently poorer’. Osborne went on to state that:
‘The Treasury analysis shows that under all plausible alternatives to British membership of the EU, we would have a less open and interconnected economy – not just with Europe but, crucially, with the rest of the world.’
The big figure coming out of the report has been a -6% drop in UK GDP up to 2030, although this (along with the rest of the report) has been ridiculed by ‘Out’ campaigners, particularly Conservative MP Liam Fox, who denounced the claims as ‘nonsense’.
Euro (EUR) Advances on Potential for Cycle-Breaking Announcements from Greek Creditors
As with the UK, there have been scant few economic announcements for the Eurozone made so far today, which has weighed on the overall movement of the Euro (EUR) in either direction.
With that in mind, however, the Euro has nonetheless been able to advance strongly against most of its peers, having recorded gains of 0.4% against the Pound Sterling (EUR/GBP), 0.5% against the Australian Dollar (EUR/AUD) and 1.1% against the Canadian Dollar (EUR/CAD).
A potential source of investor confidence in the Euro today is not what has happened, but what could be impending for the future of Greece’s economy and its currently mountainous levels of debt.
Last week essentially saw talks cease between Greece and its creditors, on account of the International Monetary Fund (IMF)’s Spring Meeting in Washington.
This week, however, hopes have been growing that, owing to a simple lack of alternatives, Germany, one of Greece’s most stubborn debtors, may be forced to ease the reins on the currently harsh conditions which leave little prospect of a rapid and stable Greek economic recovery.
With that in mind, German Finance Minister Wolfgang Schauble has unfortunately ruled out temporary or permanent debt relief. As Greek Finance Minister Euclid Tsakalotos has stated:
‘Schauble is committed to three things that aren’t possible at one and the same time: we must have a deal, the IMF must be on board, we don’t need to give anything on debt. Those three things are mutually inconsistent. One of those three is going to break.’
Future GBP, EUR Forecast: BoE Talks due Tomorrow, along with Eurozone Survey Scores
The next economic announcement likely to affect the appeal of the Pound (GBP) against the Euro (EUR) isn’t due until tomorrow afternoon, when Bank of England (BoE) Governor Mark Carney is scheduled to meet with the Lords Economic Affairs Committee, in order to discuss the BoE’s general economic outlook.
The UK Referendum is sure to crop up in talks, although Carney may just repeat the same case of UK economic uncertainty increasing as June 23rd approaches that he has presented before.
On the Eurozone side, the single currency could be shifted by tomorrow morning’s ZEW surveys for Germany and the Eurozone in April; current predictions are for a drop for the Eurozone but a rise for Germany’s economic prospects.
Current GBP, EUR Exchange Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.2540 and the Euro to Pound Sterling (EUR/GBP) exchange rate was trending in the region of 0.7975 today.