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Euro to Pound Foreign Exchange - Today's EUR GBP Exchange Rate Rebounds Off Multi-Year Low

August 31, 2014 - Written by Tim Boyer

Today's exchange rate forecasts predict this week could see the pound to euro rate push past the best FX levels seen for two years as GBP Sterling is set to rally across the foreign exchange markets.

Sterling managed to reach 1.26391 GBP/EUR as the week's trading concluded.

Before we look at what is effecting the common currency, let's see where it stands in today's markets (1st September 2014):

- The euro to australian dollar exchange rate is -0.08 per cent lower at 1.40591.
- The euro to pound exchange rate is -0.14 per cent lower at 0.79013 (fresh lows)
- The euro to dollar exchange rate is +0.07 per cent higher at 1.31365.

Why is the euro to pound falling?



The Euro is trading amid a mass of complications; firstly there are the escalations of geopolitical tensions in Russia and Ukraine that are affecting the currency market and the risk appetite investors hold; secondly, the Eurozone recovery is quite frankly, flat lining with faith waning as to if the European Central Bank (ECB) will be able to turn it around appropriately.

Fears of deflation in the Eurozone are rife, with Policymaker for the European Central Bank Ewalk Nowotny declaring his worries for the Eurozone recovery with regards to inflation and unemployment.

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He stated: ‘I am concerned as well. What I have presented here is not a really great success story. We had expected an upturn in the Eurozone and we have an upturn—2014 is better than 2013—but it is weaker than expected.’

ECB Need to Take Action for Flailing Eurozone Economic Health

Rumours however that the ECB will not launch any new policy measures unless deflation threats become more prominent are causing anxieties with some. The Eurozone Consumer Price Index (CPI) used as a measure of inflation has been falling every month, and are now resting 0.3% away from the level that would indicate deflation. Friday’s CPI showed that inflation fell by what analysts had forecast, attaining only 0.3% in August, a gentle drop from July’s 0.4%. Friday’s figure will place further pressure on the ECB and indeed its President—Mario Draghi—who in the past has made excuses for the Eurozone low inflation and glossed over it suggesting temporary factors were affecting the rate at which inflation grows. Expert in the field Luke Bartholomew stated: ‘This is yet another bad indicator of the health of the Eurozone recovery. We are now relying on Draghi the politician not Draghi the economist to get Europe out of this mess. He is walking a tightrope between conservative European institutions and the markets desire for more stimulus. But as every month passes we get closer to the dread of deflation and Draghi looks more and more like Nero fiddling while Rome burns.’

Geopolitical Escalations Continue to weigh on the Euro

Any escalations in the Russia and Ukraine Situation will likely have an effect on the Euro in its trading in the foreseeable future. The effect of the Eurozone’s current sanctions on Russia have meant a lull in trading and a negative outlook for the next three months as Russia responded with a ban on produce imports from the EU. The complications from this are ongoing, and as the situation careers into unknown complexity, the Euro fate looks more precarious. The latest events have seen Russian troops enter Ukraine illegally, and Ukraine have called on the EU for military assistance. The US and EU are ready to place further sanctions; however, anything that could affect further trade relations between the two countries doesn’t bode well for the Eurozone recovery.

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