Euro Currency Forecast: GBP EUR Exchange Rate Forecast To Climb if ECB Cut Key Lending Rate

December 2, 2013 - Written by John Cameron

STORY LINK Euro Currency Forecast: GBP EUR Exchange Rate Forecast To Climb if ECB Cut Key Lending Rate

The Pound euro exchange rate ended last week’s session only slightly below its key level of technical resistance at 1.2048, but it managed to break through this importatnt level during early trading in last night's Asian session. The pair has attempted, and failed, to hold above the 1.2000 threshold on several distinct occasions since it was last settled in the 1.2000s during the first two weeks of the year.

Last week’s session ended with a reasonably strong set of data releases from the eurozone, but they were not enough to stop the single currency giving up ground against Sterling. The first tier one data release of note from the euroland this week comes on Wednesday with the publication of provisional quarter three Gross Domestic Product figures from the region. Analysts are not expecting much from the print, with the consensus amongst economists being that the annualised number will show at -0.4%. Anything north of this and the euro is likely to claw back some of its losses of last week against Sterling.

Thursday is likely to be the pivotal session for the GBP EUR exchange rate with a pair of central bank policy decisions from the Bank of England and the European Central Bank. The BoE leads the way at midday with its latest policy announcement. It’s a racing certainty that Britain’s base rate will remain at 0.5% and that the monetary policy committee will maintain the UK’s Quantitative Easing scheme at its current £375bn. The main intrigue of the day will be the European Central Bank’s policy announcement and the press conference which follows from ECB President Mario Draghi. A cut to the ECB’s key lending rate down to a new record low of 0.00% can not be ruled out – such an action, or any suggestion that the ECB may follow this line of policy early in 2014, would surely see the GBP EUR exchange rate make itself at home above its former 10 ½ month high of 1.2048.

Elsewhere, expect the Pound to Indian Rupee exchange rate (GBP/INR) to pull back from the multi-year high of above the 106.00 threshold which it has visited since the start of September, following the publication of Indian Gross Domestic Product figures at the end of last week. The numbers revealed that India’s economy expanded at an above-expectations annualised 4.8% during the three months to the end of September. A move back below the 100 threshold now looks likely for GBP INR in the near-term.

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