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Euro to Pound Exchange Rate Forecast - Will EUR GBP Rate Resist Further Losses?

August 26, 2014 - Written by John Cameron

Currency News UK details the latest Euro to Pound predictions showing further losses are likely forecast for the Euro To Pound Exchange Rate (EUR/GBP):

This year’s Jackson Hole economic symposium has sent share markets spiralling, favouring the risk-sensitive Australian and New Zealand Dollars (currency:AUD) (currency:NZD). The big loser from the event could prove to be the euro (currency:EUR), leading analysts to forecast further gains for the Pound euro exchange rate.

The economic symposium which took place at Jackson Hole, Wyoming at the end of last week has been organised by the Federal Reserve Bank of Kansas City on an annual basis since 1978.

However, the event only began to gain widespread interest in 1982 thanks to a coup de grace from the organisers in booking a top line speaker.

The appearance of erstwhile Federal Reserve Chairman Paul Volcker at the ‘82 edition of the get-together has been largely credited to the legendary policyman’s fascination with the pastime of fly-fishing, (Jackson Hole is a haven for the sport).

Volcker’s yearly attendance at the event cemented its place in the economic calendar as other major global central bankers began to use it as a platform for airing their views on the current state of the global economy. The 2007 version was particularly notable for comments from then Fed Chair Ben Bernanke which sent global equities markets spiralling. This year’s symposium featured set piece speeches from European Central Bank President Mario Draghi and current Fed Chair Janet Yellen, and the effects of their comments are already feeding through into world markets. In a significant move, the early part of yesterday’s North American equities session saw the broad-ranging S&P 500 share market break the psychologically-key 2,000 level for the first time.

Yellen’s assertion that the US labour market still had a considerable amount of slack added to the impression that the US central bank is de-coupling its decision to hike interest rates from the situation in the domestic jobs markets. Meanwhile, it was Draghi’s comments were considered by analysts to be ground-breaking. The ECB Chief dropped heavy hints that he favoured the ‘three arrows’ approach to monetary policy, as utilised in recent years by Japanese Premier Shinzo Abe. The inference of this statement was that an all-out bout of Quantitative Easing involving the bulk-buying of government gilts may be the next move from the eurozone’s central bank.

The improvement for global shares yesterday provided proof that the Jackson Hole comments from both Yellen and Draghi have provided further fuel for the near-term improvement in risk sentiment in spite of continuing geo-political risk events across the world. The shooting down of an Israeli drone flying in international airspace by Iranian forces over the weekend adds another dimension to the ongoing Palestine/Israel standoff. Meanwhile, the continuing surge from Islamic State forces intent on establishing an Islamic caliphate continues to threaten international risk appetite.

If appetite for risk remains buoyant, then expect the Pound Sterling to record further losses against the high-yielding Australian and New Zealand Dollars (currency:AUD) (currency:NZD). Meanwhile, Draghi’s words are likely to increase the pressure on the already down-at-heel euro (currency:EUR).
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