The latest opinion polls out of Greece have shown that support for the pro-bailout party New Democracy has increased, causing the Euro to strengthen slightly against the pound.
Many observers believe that the Euro will see a short term recovery posting small increases against other currencies and is expected to pull further away from the 3 ½ half low against Sterling. However issues with Spanish debt and its banking system could see it once against resume a downward turn. If a bailout is required to get the Spanish system back onto its feet then the Euro could falter by the end of the week with some experts are predicting that the Euro will plummet to 75 pence by the end of the year.
The pound had been expected to continue its strong position against the embattled single currency as investors looked for safer alternatives to the Euro. Recent data detailing the British economy was in a worse state than previously forecast has put a dampener on those predictions. Investors are now expected to seek safe havens further afield.
The euro was up 0.1 percent on the day at 79.95 pence, with traders citing bids at 79.80 and topside stops around 80.60 pence. Trading is thin due to a holiday in much of Europe, while U.S. markets were shut for Memorial Day.
The Dollar is expected to strengthen against both currencies as concerns over contagion from the Euro to the Pound continue to mount. Some investors are concerned that the increasing risk will weigh down on the already weakened UK economy and will cause the Bank of England to implement more quantitative easing measures. More QE is bearish for the currency as it increases the supply of pounds in the system and drives down short term rates.
JPMorgan has revised its sterling forecasts saying that it will go lower against the dollar and expects it to weaken to $1.54 by mid-year. It expected sterling to gain against the euro, though.
Against the dollar, sterling will struggle, not least as speculative positions are now so long and the BoE signaled in its Inflation Report that the bias to ease policy remains intact,” it said in a report.
The Pound to Euro exchange rate is currently trading at 1.251
The Pound to US Dollar exchange rate is currently trading at 1.569
The Euro to Australian Dollar exchange rate is currently trading at 1.273
The Euro to US Dollar exchange rate is currently trading at 1.254
The Euro to Pound exchange rate is currently trading at 0.798