Pound Euro Exchange Rate Fails To Set 15 1/2 Month High Triggering Negative Exchange Rate Forecast

April 23, 2014 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Fails To Set 15 1/2 Month High Triggering Negative Exchange Rate Forecast

In a key technical move, the Pound euro exchange rate made a run at its 15 ½ month high of 1.2258 GBP/EUR during late trading yesterday. However, a combination of a wishy-washy set of Bank of England minutes and relatively strong data from the eurozone meant that Sterling to Euro rate topped out at 1.2198 GBP/EUR during yesterday’s US equities trading before falling into the low 1.2100s today.

The Pound Sterling to Euro exchange rate is trading down -0.32% at 1.21444 GBP/EUR. The Euro to Pound Sterling exchange rate is trading up +0.32% at 0.82342 EUR/GBP. These exchange rates were updated at 20:00 GMT Wednesday 23rd April 2014.

The minutes of the latest Bank of England monetary policy committee meeting, which took place earlier this month, were published earlier. The market abhors uncertainty and the April memos injected a fair shot of doubt into the UK monetary policy mix, revealing that the committeemen held different and varied views regarding the state of the British economy.

Pound Sterling forecast hampered by UK price rises?

The real worry for investors holding Sterling-denominated assets was that, ‘there was considerable uncertainty about the amount of slack remaining within the economy and committee members had a range of opinions on this and the outlook for inflation in the medium-term’. The confirmation that the Bank’s policy committee does not have a clear view on the likely way ahead for UK price rises could hamper the Pound moving forward.

On the credit side, the MPC statement did confirm that the committee considered it ‘possible’ that a marked increase in real wages in Britain might be on the way upwards, (last month was the first month for many years which saw the rate of increase in UK wages outstrip the headline CPI measure of British inflation). However, the Bank’s use of the weakening word ‘possible’ shows the level of uncertainty which UK policymakers are facing. The MPC’s assertion that the UK economic recovery is gaining momentum is a clear positive, which has the potential to support Sterling moving forward.

Euro currency gained on EuroZone/Germany PMI surveys

Meanwhile, turning to the euro, this morning’s session brought the release of a stronger than anticipated set of PMI surveys from both the eurozone as a whole and from its primary economy – Germany. The figures helped the Pound euro exchange rate fall GBP/EUR, but the euro US Dollar exchange rate EUR/USD remained steady in spite of the positive prints. Tomorrow’s German IFO Business Climate survey will afford the GBP EUR exchange rate further direction.

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