GBP to Euro, Dollar, and Other Major Exchange Rates Forecasted to Lower

August 13, 2014 - Written by John Cameron

STORY LINK GBP to Euro, Dollar, and Other Major Exchange Rates Forecasted to Lower

The Pound Sterling exchange rate complex (currency:GBP) has slumped against the other majors, with forecasts revised lower, thanks to a downbeat assessment of the British economy from the Bank of England. The UK central bank’s latest Quarterly Inflation Report, published earlier, revealed that UK policymakers now expect domestic wage growth to expand by a slim 1.25% during 2014, (versus its previous estimate of 2.50%).

Bank of England Governor Mark Carney’s assertion, following the release of the report, that the current relative strength of the Pound Sterling presented a significant headwind to the health of the domestic economy added to the downside for the Pound on the day.

Neil Jones of Mizuho Bank assessed the fallout, stating earlier that, “the market is busy pushing back its interest-rate hike expectations well into 2015. That is the key why the pound is being sold across the board. There was some expectation and pre-announcement bullishness, however, given the downward revision in wage projections and the ‘gradual and limited’ words again, the market is selling the Pound.’

The development cancelled out the positive effect of official government employment statistics, also published this morning, which revealed that the overall level of British unemployment had dropped from 6.5% to 6.4% during the three months to the end of June. The increase in overall employment of 132,000 during the same period meant that the total level of joblessness in the UK now stands at 2.08m – close to its lowest level for six years.

These encouraging numbers had briefly sent the GBP to Dollar exchange rate up to as high as 1.6844 during early trading. However, by the middle part of the European equities session, the pair was trading back down at 1.6694.

Elsewhere, a disappointing set of whole of eurozone Industrial Production figures, published at 10:00hrs BST, served to mitigate the damage which the Bank of England’s inflation report had wrought on the GBP to Euro exchange rate.

Analysts had been expecting the euroland factory output number to show a slight annualised increase of 0.2%, so the result of 0.0% change held back the single currency on the day. The next key risk event for the euro comes in the form of tomorrow morning’s German Q2 Gross Domestic Product figures.

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