GBP/EUR & GBP/AUD Outlook: Near-Term Losses Forecast for Pound Sterling to Australian Dollar and Euro

March 25, 2015 - Written by John Cameron

STORY LINK GBP/EUR & GBP/AUD Outlook: Near-Term Losses Forecast for Pound Sterling to Australian Dollar and Euro

Britain’s Office of National Statistics has been measuring the Consumer Price Index since 1988; yesterday morning saw the benchmark gauge of the pace of UK price rises tumble to its lowest level since records began at 0.0%. This result means that, in theory at least, the cost of a wide-ranging basket of British goods was exactly the same last month as it was in February 2014. The next stop for UK prices is surely deflation, with most analysts predicting that April’s domestic CPI inflation reading will fall to below zero. What does this mean for the Pound Sterling (currency:GBP)?

The UK unit shipped support against all of the other sixteen most-actively traded global currencies yesterday as investors digested the lower than anticipated result from the UK inflation data. The Pound Sterling euro exchange rate fell to as low as 1.3568 GBP EUR as analysts priced in an increased chance that the Bank of England’s next policy move might be an interest rate cut rather than an increase. The GBP EUR exchange rate had traded up to close to 1.4300 during the early part of this month as market participants priced-in the commencement of the European Central Bank’s €1.14 trillion Quantitative Easing programme.

Meanwhile, Sterling also lost significant ground against the high-yielding Commodity Dollars, with the Pound Sterling Australian Dollar exchange rate slumping to an intraday low of 1.8849 GBP AUD. The Aussie has been held back during recent weeks by the sneaking suspicion that the Reserve Bank of Australia may be set to cut its interest rate one or more times before the end of the year. These fears remain for Aussie-holders, but the fact that the Bank of England could now potentially follow the same policy path has caused analysts to increase their forecasts for the expected yield advantage which Australia will enjoy over the UK come the final session of 2015. A similar line of thinking lead the Sterling New Zealand Dollar exchange rate lower; the pair dropped to 1.9440 on the day and analysts forecast that there could be further losses to come for this pair.

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TAGS: Australian Dollar Forecasts Currency Predictions Euro Forecasts Eur Forecasts