British Pound Sterling Exchange Rate Forecast - Euro, Swiss Franc and the US Dollar

March 26, 2015 - Written by John Cameron

STORY LINK British Pound Sterling Exchange Rate Forecast - Euro, Swiss Franc and the US Dollar

The Bank of England’s monetary policy team came out in force yesterday to scotch market rumours suggesting that the next move from the Old Lady of Threadneedle Street might be an interest rate cut. Holders of the POUND STERLING (currency:GBP) were relieved to hear firstly Kristin Forbes and then David Miles publicly state that the next BoE move was still likely to be a rate increase. Sterling has been sold off hard over the last week, but analysts forecast that the UK unit will perform on a NEUTRAL TO POSITIVE footing over the next week.

The EURO (currency:EUR) has registered decent gains against both the Pound and the Dollar during the past seven days. However, beware false moves – this renewed support for the shared currency has largely arrived by default – the Pound and the Buck have been sold off as investors downgraded their expectations on interest rates from both the Fed and the BoE. The euro still faces two sizable problems in the form of Greece and Quantitative Easing – for these reasons, the outlook for the single currency remains firmly NEGATIVE. The GBP EUR exchange rate stands at 1.3570.

The US DOLLAR (currency:USD) has put in a tame performance in the global currency markets since last week’s decidedly dovish comments from the Federal Reserve. Futures markets were expecting a US interest rate hike before the end of Summer, but the same futures markets now price-in the most likely month for a Fed rate rise as December. Expect the Buck to lose ground against the other major global currencies as investors continue to downgrade their US monetary policy expectations. The GBP USD exchange rate stands at 1.4870 and the outlook for the Greenback is NEUTRAL TO NEGATIVE.

The SWISS FRANC (currency:CHF) continued its near-term renaissance against Sterling during yesterday’s session. The Franc was heavily sold-off following the Swiss National Bank’s decision to cut its key interest rate to a lowly -0.75% in January and the move which followed sent the GBP CHF exchange rate up to close to the 1.5000 threshold. However, support for the Swiss unit has firmed during recent sessions and yesterday morning’s relatively strong showing from the latest UBS Consumption Indicator added to the impression that Switzerland’s economy is in decent shape. The Franc is expected to trade with a NEUTRAL TO POSITIVE bias moving forward and the GBP CHF exchange rate now stands at 1.4298.

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