by Jack Smith
Sterling has strengthened +0.22% versus the euro today to hit 1.3330, less than two cents from its highest in more than seven years, or since January 25th 2008.
The pound has climbed, because German chancellor Angela Merkel has signalled her opposition to cutting Greece's debt, putting her on a collision course with Athen's recently elected government. Speaking today, Mrs. Merkel told journalists that "I don't see a further debt haircut for Greece," which currently has a public debt of €320 billion, or roughly +175% of GDP.
This conflicts with the approach of Greece's freshly formed government, led by extreme left-wing party Syriza, which aims to reduce Greece's debt without the Hellenic nation leaving the Eurozone. For instance, Greek finance minister Yanis Varoufakis said today that "We are not prepared to carry on pretending and extending, trying to enforce an unenforceable programme which for five years now has steadfastly refused to produce any tangible benefits."
Hence, this lifted the pound, because it suggests that Mrs. Merkel has taken a hard-line approach to Greece's debt, that will be difficult to reconcile with the hopes of Athen's new government. If a compromise is unable to be found, this lifts the odds that Greece may eventually leave the currency bloc.
