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Posted June 12th, 2015 by Charles Purdy

Recovering Greek situation could be bad news for sterling

For the first five months of 2015, sterling has experienced exceptional strength – particularly against the euro. While this has in part been due to a strong UK economy and the re-election of David Cameron and the Conservative party (reflecting the currency markets’ desire for political consistency) a significant factor behind this has been due to negative news from the Eurozone.

January brought with it the release of the peg on the Swiss Franc and the European Central Bank’s (ECB) announcement of a Quantitative Easing (QE) programme – and began a turbulent time for Greece when the anti-austerity Syriza party scored a victory in the country’s elections, and immediately entered discussions with the rest of the Eurozone over the money owed by the country. The GBP/EUR rate began 2015 at a rate of 1.2872, and by the end of January it had hit 1.3334 – and continued to prosper over the next few months as Greece discussions were ongoing, despite a fall for sterling in the run up to the UK election, hitting an eight-year high of 1.4159 in March, and returning close to this high at May drew to a close.

 

Price conversion for a €250,000 property in to sterling (EUR to GBP):

Date Exchange Rate Amount in pounds (£)
 2nd January 2015  1.2872  £194,220
 30th January 2015  1.3334  £187,491
 11th March 2015  1.4159  £176,556
 29th May 2015  1.3981  £178,814
 5th June 2015  1.3608  £183,715

 

However, as June began it became clear just how dependent this strong sterling was on the uncertainty in Greece with the euro gaining almost 4% against sterling in the first four days of last week, with the rate slipping from 1.3981 at the end of May to 1.3608 by the end of last week – although it remained almost 7% higher than the beginning of this year. This shows just how much sterling remains affected by external factors – and how significant the situation in Greece has been to the currency markets in 2015.

This has been reiterated by the resurgence of sterling early this week, as Greece delayed its payment due last Friday until the end of June. It is impossible to predict what will happen to the euro next, and by association it’s pairing with sterling. When the negotiations are going well, the euro reacts accordingly, and vice versa. If you need to convert sterling into euros in the near future, why not give us a call today? The sooner I can start working on a currency strategy for you, the sooner you can take advantage of a strong sterling – especially if the Greece situation continues to improve.

To find out how you could be affected by the economic situation in Greece, give us a call on 020 7898 0541.

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