Exchange Rate Forecasts: Pound to Euro (GBP/EUR) Losses & Pound to Dollar (GBP/USD) Gains

April 17, 2014 - Written by John Cameron

STORY LINK Exchange Rate Forecasts: Pound to Euro (GBP/EUR) Losses & Pound to Dollar (GBP/USD) Gains

Here is our Exchange Rates Forecast: Pound to Euro (GBP/EUR) and Pound to Dollar (GBP/USD):

The Pound US Dollar exchange rate has broken to a fresh 4 ½ year high during this morning’s European equities session, touching 1.6843 GBP/USD a few hours ago. The move has been driven by a combination of support for the Pound Sterling following yesterday’s strong UK employment figures which revealed that the overall level of British joblessness has dropped to 6.9%, alongside a furious bout of back-pedalling from US Federal Reserve Chairperson Janet Yellen over the past 7 days. Yellen’s assertion that American interest rates will be remaining at an ultra-low level for some time to come has hurt the Greenback – investors had been pricing in interest rate rises in the States for the first half of 2015 follow.

From a technical perspective, the break above the existing range-topping level for GBP/USD is highly significant. The move confirms the extant uptrend for the pair which has been in place since last July when the Pound was trading at a lowly 1.4814 against the Buck. August 2009’s peak of 1.7042 is now all that is standing in the way of the pair motoring towards the two to one threshold – a level which the pair last visited in Q2 2008.

Oil analysts suggest that the current bout of Dollar-weakness is also partly driven by developments in the US oil and gas sector, where analysts predict that America is in for a shale gas bonanza, with decades’ worth of energy being located underneath the North American continent. As extraction firms access the gas via fracking, global demand for Dollar-denominated oil from the Middle East will ebb, decreasing global demand for the Buck. Today’s move could be the beginning of a structural shift out of the Greenback, meaning that many investors are now forecasting that the Buck will trade with a negative bias against the Pound moving forward.

Elsewhere, this morning’s session has also seen the Pound euro exchange rate make a run at a significant level – its 14-month high of 1.2258 GBP/EUR. The pair’s apparent failure to breach this level sounds a negative indicator for GBP/EUR moving forward.

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