BREAKING EUR -Sterling Euro Exchange Rate Climbs Another 0.33PCT on Thursday

June 10, 2014 - Written by John Cameron

STORY LINK BREAKING EUR -Sterling Euro Exchange Rate Climbs Another 0.33PCT on Thursday

The Pound Euro was sent to its highest level since the start of last year after the market’s initial response to the European Central Bank’s announcement that it was embarking on a pathway to Quantitative Easing last Thursday was predictable; the result - the single currency exchange rate leaked support.

On Thursday 12th June, the Pound to Euro exchange rate has surged ahead once more, gaining 0.33% per cent by 10:00 GMT priced at 1.24451 GBP/EUR. The Dollar is showing a 0.08 per cent gain against the single currency at 0.73931 USD/EUR.

However, subsequent price action for the pair appeared to be counter-intuitive, with the Pound to Euro exchange rate dropping back to the 1.2300 level once more during Friday trading. The shift back into euro-denominated assets at the end of the week was partly driven by technical factors – GBP/EUR looked near-term overbought by the middle part of Thursday’s session – only a day before the pair had been changing hands in the 1.2200s. The move down towards 1.2300 on Friday represented the pair bouncing off the bottom of a well-established upward trend channel which has been in place since the middle part of last year.

Forecasts - will the Pound continue to gain against the Euro?

However, analysts are beginning to view the single currency in a different light following last week’s ECB announcement that it would be cutting its key lending rate to a fresh all-time low of 0.15%. Eimear Daly, head of market analysis at Monex, explained yesterday that, “Euro rate slippage today is the result of speculation the euro will become a funding currency.”

For many years the Japanese Yen has been the global economy’s funding currency of choice as institutional investors took out Japanese loans at interest rates close to zero and parked their cheap-money in higher yielding shores, (think Australia / New Zealand / South Africa). However, with such a low cost of borrowing in mainland Europe the euro now looks likely to take over as institutional investors’ currency of choice for such carry trades. The upshot could see investors stage a wholesale move out of euro-denominated assets. Analysts therefore forecast further near-term gains for the Pound Sterling euro exchange rate.

Key Euro (EUR) Rates Today (11/06/2014)

The Pound Sterling to Euro exchange rate is trading up +0.32% at 1.24444 GBP/EUR.
The Euro to Australian Dollar exchange rate is trading down -0.21% at 1.43998 EUR/AUD.
The Euro to Pound Sterling exchange rate is trading down -0.32% at 0.80357 EUR/GBP.
The Euro to New Zealand Dollar exchange rate is trading down -0.77% at 1.56078 EUR/NZD.
The Euro to Dollar exchange rate is trading down -0.08% at 1.35262 EUR/USD.
The US Dollar to Euro exchange rate is trading up +0.08% at 0.73931 USD/EUR.

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