GREEK UPDATE – What would happen to the Currency Market – Seven Year High

GBPEUR levels remain unsettled this week as everyone is waiting for news on the future of Greece and their bailout.  The market is very wary and there are a number of potential outcomes but most are expected to change rates quick widely.

  1. If they leave the Eurozone it is likely to bring with it a prolonged period of Euro weakness. It is written in laws across the Single Currency that the Euro is forever, if it is not it puts the whole system at risk impacting everyone including Germany.
  2. If they stay and renegotiate their package the euro could arguably strengthen, this is from the certainty in knowing that the ‘euro system’ is not at risk of collapse. This period could also be followed by further losses again as other member states start to renegotiate their own bailout package.
  3. Lastly, and probably the most likely outcome, is them getting an extension. Pushing the problem back 6 months for another day. This I would expect to give a small amount of euro strength but will probably only have a small impact on currency rates of exchange.

In either case if they do do option 1 or 2 we could see rates change significantly over the next 7 days.  The last deadline is next Friday and we all know that politicians normally only work best at the eleventh hour.  They have however been in a room for over a week now trying to get something agreed so arguably an announcement could come at any point.

As a result clients are really trying to hedge their exposure or protect it.  The only certainty at the moment is that clients looking at buying euros are at a 7 YEAR HIGH. Even before trying to second guess the markets people have to respect the opportunity we have in front of us.

For more information and a personal view on your situation please feel free to get in contact with myself, Steve Eakins. Email may be best at hse@currencies.co.uk or feel free to call on 0044(0)1494-725353.