Greek Election Chaos Pulls Pound to its Highest Currency Exchange rate against Euro Since 2008
Peter Lavelle at foreign exchange specialist Pure FX
Welcome to my weekly update regarding the foreign currency exchange rates. These are intended as a brief guide to what’s affected the market in the last week, to help you decide if now’s the best time for you to change currencies.
Here is what’s affected the rates the most this week:
- The UK pound has hit its highest point against the euro since late 2008 at 1.2440, as electoral chaos in Greece raises the possibility Athens might resurrect the drachma.
- Socialist Francois Hollande triumphed in the French presidential contest as predicted, but his triumph had been ‘priced-in’ to the euro beforehand, so that it didn’t affect the rate.
- Spain contributed to euro weakness, on reports that one of its biggest banks (Bankia) is set to receive €10bn in state bailouts.
- The dire reports from Europe have dampened global sentiment, sending the pound to its highest currency exchange point against the New Zealand, Australian, and Canadian dollars in six months.
- UK retail sales declined -3.3% last month compared to 12 months ago, signalling that consumer confidence remains weak (but not affecting the pound.)
- The latest UK trade figures as well as Bank of England interest rate decision are due Thursday morning.
Let’s examine these points in more detail then.
The pound hits its highest point against the euro since the financial crash this week then. You could argue this is down to a combination of factors (Francoise Hollande triumphing in France, Spain’s banking sector sinking deeper into the mire) but in reality it’s all because of Greece.
The Greek people voted for a parliament of Communists and Neo-Nazis at their elections on Sunday, furious at the austerity the European Union has imposed on them and champing at the bit to leave the euro. (Given what austerity has done to Greece – five years of recession and 20.0% unemployment – you can hardly blame them.)
For the markets, this sends a signal that the entire Eurozone project is under threat. If Greece leaves the euro after all as it rejects further austerity, which ruins the conception of the euro as an irreversible aspect of European integration. It opens the door to Portugal and Ireland exiting the euro too, hence putting the entire survival of the currency in doubt.
Given this, it’s little surprise that the euro has weakened, as have other currencies dependent on risk such as the Australian and New Zealand dollars. The markets have ignored disappointing retail sales from UK, as well as the fact that Britain is in recession, and fled to the pound as a haven.
I hope this post has been of interest. I will of course return with my next update next week. Of course, if you have any questions about transferring money abroad in the meantime, don’t hesitate to leave a comment below.
For my last currency exchange posting click here.
Foreign Exchange Specialist Pure FX
Category: Currency news