Gains Forecast for GBP EUR and GBP INR Exchange Rates

January 16, 2015 - Written by John Cameron

STORY LINK Gains Forecast for GBP EUR and GBP INR Exchange Rates

Speculation regarding an immanent action from the European Central Bank (ECB) reached fever pitch following a surprise move from Switzerland during the early part of yesterday’s session.

The Swiss National Bank (SNB) shocked the global markets by announcing early yesterday that it was scrapping the minimum floor on the euro Swiss Franc exchange rate EUR CHF of 1.2000 which it instigated 3 years ago. Predictably, support for the Swiss Franc surged on the move, but a knock on effect of the move saw the euro slump.

The shift out of the single currency was driven by two separate factors; firstly, investors took the SNB’s move as a tacit admission that it will no longer be able to maintain the 1.2000 EUR CHF floor after next Thursday, (i.e. the ECB will be introducing full tilt Quantitative Easing in under a week). Secondly, the move back into Swiss Franc-denominated assets came, to a large extent, out of euros.

The move out of euros sent the Pound Sterling euro exchange rate up to its highest level since the start of 2008, with the pair edging above the 1.3100 during the early part of the European trading session.

Elsewhere, the Swiss National Bank was not the only central bank to catch investors on the back foot yesterday – the Reserve Bank of India announced that it would be affecting a rare intra-policy meeting cut in its key interest rate from 8.00% to 7.75%. The Indian finance ministry's chief economic adviser Arvind Subramanian stated yesterday that the move signalled a shift in his nation’s monetary policy, suggesting that there may be further loosening to come. The Pound Sterling Indian Rupee exchange rate held relatively steady on the day in spite of the news, trading in a tight range either side of the 94.00 GBP INR level. However, yesterday’s was a highly volatile session and when the dust settles, analysts forecast that the GBP INR exchange rate may recoup some of the losses which it has incurred since Narendra Modi gained power last May.

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