As we head into the big freeze in the UK this week, the outlook for the Euro remains equally as frosty as the deadline for Greece and its €130bn bailout deadline draws ever closer. Debt-laden Greece must make €14.5billion of debt repayments in March, and failure to come up with the funds poses a potentially huge threat to global financial markets. The effects on the Euro are unclear, however I would certainly expect losses against the US dollar as the ‘safe haven’ tag of the dollar will lead investors towards the greenback in these uncertain times.
In terms of EUR/GBP – the implications of a Greek default will be felt heavily on not just the global economy but also the highly finance dependent UK economy. A Greek default is likely to push an already fragile UK economy further on the path to recession. I do feel an agreement will be made as I feel the ramifications for a Greek default will be catastrophic and this scenario needs to be avoided. Should an agreement be reached I would expect Euro strength – the deadline for the larger part of their debt is set for 20th March and I would expect continued market volatility until this point.
Short term anyone with an interest in the EUR/GBP pair should keep a close eye on Thursdays interest rate decision by both the Bank of England (BofE) and European Central Bank. It is widely expected both central banks will keep the base rate on hold at 0.5% and 1% respectively, however what is key is whether the BofE decide to extend their asset purchasing programme of Quantitative Easing (QE). Since its introduction in March 2009 the bank has injected £275bn into the UK economy, and on each occasion more money has been printed the value of sterling has been diluted and posted losses against the majority of currencies. The market has possibly priced in an outside chance of more QE on Thursday (I personally believe it more likely in March), however any Euro buyers may wish to take stock of their options prior to this release.
Should you have a pending Euro exchange or a vested interest in any of the major commonly traded currencies and you would like to discuss the various contracts we can offer then please email me at email@example.com