GBP EUR Exchange Rate Forecast: Most FX Analysts still Predict Near-term Gains for Sterling Euro

October 27, 2014 - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Forecast: Most FX Analysts still Predict Near-term Gains for Sterling Euro

The Pound to euro exchange rate (GBP/EUR) edged higher during this Monday’s session following the publication of another bad news story in Germany.

The latest edition of the closely-monitored IFO business sentiment survey showed a drop-off from the previous month’s reading, as per analysts’ expectations.

However, the dip was more pronounced than had been anticipated, adding to the single currency’s woes.

Latest EUR Conversions Today:

The Pound to Euro rate today is +0.02 pct higher at 1.26954 GBP/EUR.
The US Dollar to Euro conversion rate is -0.24 pct lower at 0.78696 USD/EUR.
The Swiss Franc to Euro exchange rate today is converting +0.08 per cent higher at 0.82953 CHF/EUR.
The Canadian Dollar to Euro exchange rate converts -0.24 per cent lower at 1 CAD is 0.70031 EUR.

Positive CBI Report Helps Pound Sterling

Meanwhile, the October edition of its Reported Sales data, published by the Confederation of Business industry in the UK a couple of hours later, showed at a higher than anticipated level, adding to the upside for the Pound Sterling euro GBP EUR exchange rate on the day.

The pair had been testing higher even before the dual data releases on this side of the Atlantic following the news that twenty four European Union retail banks had failed the latest European Banking Association stress test of the sector, released yesterday.

The pair broke to an intraday high of 1.2716 earlier, before settling back down in the higher end of the 1.2600 – 1.2700 region a short time ago.

Technical Resistance At 1.2700 For GBP EUR Exchange Rate

Looking at the technical side of things, GBP EUR has been flirting with the 1.2700 threshold for several sessions now.

However, the pair has stubbornly refused to break above this psychologically significant level, largely thanks to last week’s below par UK inflation figures which continue to weigh down the Pound.

It may take an exogenous input to give the pair the final push it requires to break upwards towards a new 2-year+ high of close to 1.2900.

Wednesday evening’s US Federal Reserve policy announcement could provide just such an impetus; if, as has been mooted by several economists, the Fed drops its guidance that US interest rates will remain at their current ultra-low levels for a ‘significant period’, then expect the Buck to enjoy renewed support, pushing the EUR USD lower.

In such a circumstance, the single currency is also likely to ship support against the Pound via arbitrage trading.

Euro-Watchers Await Bond Buy-Up Data

Elsewhere, investors will get further clues regarding the likely future direction of the euro when European Central Bank President Mario Draghi reveals how much his bank has spent on covered bonds during the past seven days as part of its asset purchase scheme.

A low showing may hasten an all-out bout of Quantitative Easing from the euroland’s central bank – a move which would be sure to further weaken the single currency.

Richard Barwell of RBS Group stated earlier that, ‘in terms of the ECB’s aspiration to expand its balance sheet, the market wants it all now. There’s scope for immediate disappointment to the scale of the purchases we see today.’

Most analysts therefore still forecast more near-term gains for the Pound euro exchange rate.

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