After another few weeks of concerns that Greece will fail to hit budget reform targets, another vote took place last night. The strikes and riots that also took place as a result were some of the most violent that we have seen. Many have commented that it is surprising to think that there are any more austerity cuts that can be made in Greece, but by a slim margin a new round of cuts were voted in by parliament. This most recent round authorises a further €14 billion of cuts and as a result should release their next tranche of support from the EU of around €31 billion. The cuts will include further wage cuts, tax rises and a change in the law to make it easier for companies to reduce their staff numbers.
(The vote was expected to take place yesterday afternoon but due to parliament workers realising could receive wage cuts due to the vote they joined the strikers outside delaying the voters till late evening.)
So how does this affect exchange rates?
Following the announcement we saw the euro gain strength, making it more expensive for people to buy the single currency. However we have to remember that Greece only equates for 1.8% of the GDP for the whole euro zone, so unless concerns build to a point that risks them staying in the Euro, I think they will only change markets marginally. But is this a possibility? Well potentially, as their debt to GDP level is still expected to be over 180%, well above targets set there is the potential to force them out, but personally I think that this strategy for Greece is long gone, too much money has been spent. So if you have a euro exposure, either buying or selling, keep an eye out on future events in Greece as it will move markets but I would be surprised to see anything larger than 0.5% unless its news that they are leaving the single currency.
At the end of the day no one can tell you what the markets are going to do, but hopefully my commentary above gives you some food for thought?
Next on the horizon for Euro traders is the interest rate decision for both Europe and the UK which takes place later today. These could easily move the market by 1.5%, potentially costing you an extra £3,750 on a €200,000 transfer! So if you need to move in the near future I would suggest you review your strategy.
If you are looking at completing an currency exchange and are looking for the best exchange rate, feel free to contact us here. We have been helping people for over 12 years, simply put if we could not save you money we would not exist.
Thank you,
Steve Eakins