GBP EUR Exchange Rate Forecast To Rise, Same Story For GBP AUD

Published: Monday, 13 May 2013 09:00 BST - Written by Frank Davies

STORY LINK GBP EUR Exchange Rate Forecast To Rise, Same Story For GBP AUD

Decisions by two of the world’s leading central banks appear likely to continue to have a pronounced effect on price action in the global currency markets this week. Last week’s surprise announcement by the Reserve Bank of Australia that it was cutting its key lending rate by 25 basis points to a new record low of 2.75% came as a body blow to the Australian Dollar, sending the Pound to Australian Dollar exchange rate (currency : GBP AUD) up to its highest level since the first week of this year.

Selling pressure on the Aussie was accentuated by market whispers that leading investor George Soros, (famous for his strong bet against Sterling in 1992) had taken out short positions against the Australian tender totalling US$1bn.

Yesterday’s statement from Australia’s Treasurer Wayne Swan that the historically strong Aussie, which has reached record highs against the Pound earlier this year, has provided ‘an unprecedented whack’ to the nation’s tax revenues, meaning that the Anitipodean state has not managed to balance its budget this year, as expected. The news is likely to increase the likelihood that Australian policymakers will take steps to weaken their currency as 2013 progresses.

Elsewhere, the European Central Bank also caught investors on the back foot when it announced that it was cutting interest rates in the eurozone to a new all-time low of 0.50% ten days ago. The move eroded the slight yield advantage which the single currency had enjoyed over Sterling, sending the Pound to euro exchange rate (currency : GBP EUR) briefly back above the 1.1900 level last week. Tomorrow morning’s publication of the latest edition of the closely-monitored ZEW Index in Germany will afford the euro further near-term direction, as will Wednesday morning’s key German GDP growth data for Q1. A showing of 0.2% is expected – anything less than this would heap the pressure on the single currency, making a break back above the psychologically vital 1.2000 level a realistic possibility for GBP EUR in the near term.

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