Germany key to the future of Greece and Euro exchange rates going forward
The last few trading days have been some of the busiest that we have witnessed on the trading floor. The volumes have increased due to the uncertainty surrounding the EU debt problems and this has given us the opportunity to offer clients buying or selling Euros some of the tightest spreads available on the FX markets. Because we are in unprecedented territory no one can categorically state what is going to happen with the Euro and Greece going forward over the next few years.
German Chancellor Angela Merkel may fall short of a majority in her own coalition for a crucial vote tomorrow on the euro zone rescue fund meant to stop a sovereign debt crisis spreading across Europe from Greece. We have witnessed the PIIGS of Europe going through a horrendous year or two and if the German Chancellor cannot convince the German MP’s to agree to raising more funds for the EFSF then the future of Greece could be bleak in the near term.
It is getting close to crunch time though for EUR exchange rates. Most of the traders in the office still feel that the Euro is overvalued against the pound. The problem is that every time a further bailout is announced the Euro goes on a rally strengthening due to confidence being put back into the global economy.
Depending on where you are in Europe you should be very concerned of the events that could pan out over the next year. The way I see it is that the IMF & World bank cannot continue indefinitely to pump Billions of Euros into countries that will eventually default. I think the strongest economies in the Euro Zone will continue to use the Euro but the weaker economies like Greece, Italy Spain and Portugal could eventually be expelled. If you have assets in these countries you could find that they half in value. This is a very scary thought!!! For you as an individual this could be horrendous but from the individual countries point of view it will boost exports again, increase tourism once more and start to create jobs for the locals. I feel this is the only way the Euro Zone can go forward.
Looking forward for clients who are exchanging GBP/EUR or vice versa the rest of the week throws up many data releases in both the UK and Germany from house prices, consumer confidence figures to employment data.
Then next week the biggest release will be the interest rate decisions in both the UK and Euro Zone. There is an outside chance that we may see the ECB cut rates and for the BoE to step up their QE programme. Over the next week we will inform what the implications are for all scenarios but if you would like to speak with us before this to see what we can do to help you make a saving on your currency exchanges please feel free to contact us on 0044 1494 787 474 or email me at firstname.lastname@example.org. Just quote PSF and ask for Ben.