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Pound to Euro Forecast - Analysts Predict Hit Best GBP/EUR Exchange Rate in Two Years

August 27, 2014 - Written by John Cameron

Analysts forecast further upward movement towards the best exchange rates seen in two years for the British Pound to euro exchange rate in spite of a leading German policymaker’s comments. The next key levels of technical resistance for the GBP/EUR come at 1.2700 and 1.2894.

The euro (currency:EUR) has suffered significant downside following comments from Mario Draghi at the Jackson Hole economic symposium on Friday.

Euro rate today, at time of publish:

- The pound to euro exchange rate is +0.09 per cent higher at 1.25756.
- The pound to dollar exchange rate is +0.3 per cent higher at 1.65961.
- The euro to australian dollar exchange rate is per cent at 1.41380.
- The euro to pound exchange rate is -0.09 per cent lower at 0.79519.
- The euro to dollar exchange rate is +0.21 per cent higher at 1.31971.

The key element of Draghi’s speech involved an off-the-cuff comment which did not appear in the set text which was released to journalists. Originally, the European Central Bank President had intended to state that,

‘Inflation has been on a downward path from around 2.5% in the summer of 2012 to 0.4% most recently. Acknowledging this, the Governing Council would use also unconventional instruments to safeguard the firm anchoring of inflation expectations over the medium- to long-term.’

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However, when he stood up to speak, Draghi ad-libbed, commenting that not all of the factors affecting the rate of eurozone price rises is not solely dependent upon internal price pressures in the euro area. The ECB Chief went on to confirm that, his Bank’s, ‘Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term.’ Market participants inferred from this that the bulk-buying of sovereign debt by the ECB remains a possibility for later in the year.

The negative effect of Draghi’s words continues to be felt by the euro, with the Pound Sterling euro exchange rate (GBP/EUR) moving Northwards to 1.2593 earlier today. However, the selling pressure on the single currency was temporarily abated by a statement from German Finance Minister Wolfgang Schaeuble earlier today. The Teutonic FinMin described Draghi’s Jackson Hole comments as 'over-interpreted.'

Pound to Euro Exchange Rate Forecast - Trend up to Best Exchange Rate in 2 Years



Nevertheless, the economic statistics coming out of the euroland remain disappointing; this morning’s GfK Consumer Confidence Survey of the German economy printed at a below-expectations 8.6 versus last month’s 8.9. The dip in positivity amongst economic participants in the eurozone’s number one economy adds to the impression created by last week’s official data showing a quarterly contraction in the German economy that all is now well with Germany. If tomorrow morning’s German overall unemployment figures show at higher than the anticipated 6.7%, then look for the Pound euro exchange rate to trend upwards towards its 2-year high of 1.2894. However, consecutive closes above its near-term peak of 1.2700 will be required before this becomes a realistic possibility.

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