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Gains Forecast for GBP USD, Pound Sterling Breaks to 7 ? Year High Versus Euro

February 24, 2015 - Written by John Cameron

The main news in the currency markets this afternoon has been the eurogroup’s approval of Greece’s list of proposals for reforming its economy. The ascent from the euroland’s Finance Ministers means that it is now a formality that the debt-addled Hellenic state will receive a 4-month extension to its current bailout funding.

The Pound Sterling euro exchange rate had jumped to its highest level since 2007, touching 1.3668 GBP EUR during early trading as market participants priced-in the news that Greece had failed to present its list of reforms to the eurogroup by yesterday’s deadline. However, the raft of proposals, which focussed on efforts to rein in domestic tax evasion and tobacco duty dodging, were put in front of the euroland’s Finance Ministers early today and they agreed to them a short time ago. Some commentators had forecast that the news, which was by no means unanticipated, might send the GBP EUR exchange rate back down into the 1.3400s once more, but the development appears to have had little effect in galvanising support for the single currency.

Elsewhere, the euro US Dollar exchange rate has held steady on the day in spite of the pronounced bout of weakness for the single currency in early trading. The US Dollar has struggled to assert itself against the euro this afternoon following distinctively dovish comments from US Federal Reserve Chair Janet Yellen in her appearance before the Senate Bank Panel in Washington this afternoon. Yellen stated that the Fed expects inflation to gradually rise to 2% and made the forecast that inflation will fall further in near term. The Pound Sterling US Dollar exchange rate spiked to as high as 1.5466 in the aftermath of Yellen’s comments. The set-up for the Dollar now makes Thursday’s American inflation numbers particularly significant. Analysts predict that they will show a negative number for the headline year-on-year price rise number, making a Fed rate hike an even more distant possibility and further hampering the US Dollar.

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