GBP EUR Forecast To Gain, GBP USD Exchange Rate Rises

Published: Monday, 17 June 2013 09:00 BST - Written by James Fuller

STORY LINK GBP EUR Forecast To Gain, GBP USD Exchange Rate Rises

Last Friday’s session saw the IMF weigh into the argument on whether now is the time for the Federal Reserve to begin reducing down the $85bn per month which it continues to pump into its Quantitative Easing programme.

The austere body issued a warning to US policymakers that the massive cuts to its Federal budget which President Obama’s administration has been forced to introduce this year were both ‘excessively rapid and ill-designed’. The IMF went on to predict that economic activity in the States would expand by 1.9% during 2013, but stated that this figure could have been almost twice as high if it wasn’t’t for the tax hikes and spending cuts which America’s policymakers were forced to introduce following a damaging Democrat / Republican policy stand-off at the end of last year.

The implication of the IMF’s findings is that, at the moment, America’s economy needs QE and it is far too early for the Fed to consider truing off the asset purchase tap. We will learn more about the future direction of the Fed’s monetary policy on Wednesday evening when it makes its latest policy announcement. Based on price action for the Greenback in the lead up to Wednesday, it appears unlikely that the Fed will begin winding down QE just yet. The Pound to US Dollar exchange rate has come in for a bout of sustained support over the past two weeks which has seen the pair break back above the 1.5700 level during the latter half of last week. There could be further upside to come for the pair in the second half of this week if the Fed does not announce a reduction to QE.

Elsewhere, tomorrow morning’s session brings the publication of the latest edition of the German ZEW Index. The closely-watched gauge of confidence levels in the eurozone’s premier economy will afford the GBP EUR exchange rate renewed direction following a relatively fat patch for the pair in recent weeks. Anything above the anticipated 38.1 print will be likely to send GBP EUR back down below the 1.1700 threshold sooner rather than later.

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TAGS: American Dollar Forecasts Daily Currency Updates Euro Forecasts Eur Forecasts