GBP/EUR: Minor Correction Forecast for Pound to Euro

March 23, 2015 - Written by John Cameron

STORY LINK GBP/EUR: Minor Correction Forecast for Pound to Euro

Euro Exchange Rate Steady Despite Greece Germany Talks

Greece’s hardline left wing leader Alex Tsipras is meeting German supremo Angela Merkel today as market rumours mount regarding liquidity problems in the debt-addled Hellenic state.

The tete-a-tete could prove to be an awkward one for both parties given the recent history between Germany and Greece, but up to this point, the euro (currency:EUR), has not unduly suffered as a consequence.

The Pound Sterling to euro exchange rate started the day changing hands at well above the 1.3800 threshold, but a short time ago the pair was trading at 1.3661 as investors continued to pull their funds out of Sterling-denominated assets.

Pound Sterling Hurt by Oil Price Drop

The near-term shift out of the Pound was driven by last week’s reported comments from Bank of England (BoE) policymakers suggesting that a domestic interest rate cut was now as likely as an increase.

The power of these words has been accentuated by the continued poor performance for the global oil price.

The price of a barrel of Brent Crude dropped to well below the $50 threshold during January before staging a partial recovery which saw it break back above the $60 threshold.

However, the price of a barrel of ‘Black Gold’ has edged lower once more since the start of March, suggesting to market participants that the BoE may need to countenance a rate cut in order to ensure that the British economy pulls away from a potentially damaging bout of deflation which could derail the domestic economic recovery.

UK Inflation Data on Tap

Tomorrow morning’s UK Consumer Price Index inflation data will therefore be highly significant to the medium-term fortunes of the Pound Sterling.

A showing of close to 0.0% is anticipated for the headline annualised figure – anything at or below the zero percent level will hurt the Pound badly, potentially sending the GBP EUR exchange rate back down below the psychologically-significant 1.3500 threshold for the first time since 23rd February.

Analysts forecast that in such a circumstance, a move towards the bottom of its most recent test lower at 1.3171 could be a live prospect for the pair. However, in spite of the current minor correction for GBP EUR, the major uptrend remains in place for the pair.

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TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts Pound Euro Forecasts