Greece bail-out deal boosts euro
The €30bn (£26.4bn) bail-out on the table for the struggling Greek economy boosted the single currency against the pound and the dollar today.
The pound, which neared 1.15 against the euro on Friday, was trading at 1.135 following the deal, which will see Greece able to borrow from eurozone countries at cheaper rates than money markets if it decides to.
The euro also hit a two-month high against the dollar near 1.38 at one point as confidence in the single currency was lifted.
Fears about Greece’s huge deficit have seen long-term lending rates for the country shoot above 7% in recent days as worries over a sovereign default overshadow loom.
The deal on the table thrashed out by finance ministers over the weekend would allow Greece to borrow at around 5%, with another €10bn available from the International Monetary Fund if needed.
Mark O’Sullivan, trading director at Currencies Direct, warned that the euro’s bounce-back could be short-lived despite the deal.
“Structurally nothing has changed in Europe because you have still got these highly-indebted southern countries,” he said.
The pound also hit a two-month high against the greenback near 1.55 today as investors moved their money out of the safe-haven currency.
Sterling has gained around eight cents on the dollar in the past two weeks, helped by positive economic data as well as predictions of a faster-than-expected pull-out of recession from a European think-tank.
A strong start to the General Election campaign by the Conservatives — who want to cut the UK’s deficit more quickly if they win power — has also boosted sterling.