Exchange Rate Outlook: Pound to Euro & Sterling to US Dollar Rates Forecast To Drop

July 24, 2014 - Written by John Cameron

STORY LINK Exchange Rate Outlook: Pound to Euro & Sterling to US Dollar Rates Forecast To Drop

The latest British sterling (GBP) impacting news from the eurozone this week provided the single currency with a much-needed fillip and the Pound to euro broke back down below the 1.2600 GBP/EUR threshold as a result.

The main driver from the euro area came from perennial struggler Spain; ordinarily, news that an economy’s official level of joblessness stood at 24.5% would not be considered a positive.

However, the Q2 overall joblessness figure for the Iberian economy represented a significant drop from the Q1 showing of 25.9%, suggesting that Spain’s economy may have finally turned a significant corner.

Looking at the latest euro exchange rate positions:

- The euro to australian dollar exchange rate is 1.42934.
- The euro to pound exchange rate is 0.79111.
- The euro to dollar exchange rate is 1.34291.

The news that over 400,000 new jobs had been generated added to this impression. Jose Luis Martinez of Citi certainly viewed the data in a positive light, stating that, ‘these figures are much better than expected and while there's an important seasonal element, seasonally adjusted figures are also strong," On a day when the Pound to Dollar exchange rate also broke down through a significant level, (in this case 1.7000 GBP/USD), the fact that the euro also strengthened against the Buck provided corroboration that the single currency was well and truly back in favour with institutional investors.

Elsewhere, it was poor day for the Pound Sterling following the release of UK Retail Sales numbers for June.

Although the key data set revealed another month-on-month increase in British shop sales, the move higher was of a lower magnitude than economists had been anticipating.

However, the monthly increase of 0.1% was enough to please David Tinsley of BNP Paribas who stated that the UK retail sales numbers during the three months following March were, ‘much stronger than seen in the first quarter this year and (are) the strongest over the recovery so far.’ Tomorrow’s UK Gross Domestic Product figures for Q2 will be closely-monitored by investors. If they print at below expectations, then look for GBP EUR to fall further towards the 1.2500 level.

The other highlight for tomorrow comes in the form of June’s US Durable Goods Orders data which is expected to reveal an improvement on May’s counterpart figure of -0.9%.

Anything above 1.0% from the data and thepound to us dollar exchange rate is likely to consolidate below the 1.7000 level as we head into the weekend.

End of week Pound Sterling levels:

- The pound to australian dollar exchange rate is 1.80675.
- The pound to euro exchange rate is 1.26405.
- The pound to dollar exchange rate is 1.69750.

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