Pound to Euro Forecast to See Gains, Losses Predicted for GBP USD

April 22, 2015 - Written by John Cameron

STORY LINK Pound to Euro Forecast to See Gains, Losses Predicted for GBP USD

The Pound Sterling (currency:GBP) convincingly outperformed the other sixteen most actively traded global currencies during today’s session as investors priced-in the minutes of this month’s Bank of England (BoE) minutes which were released earlier.

The latest BoE memos revealed that all nine members of the UK central bank’s steering committee had voted against an interest rate increase – in itself, this did not help the Pound. However, the general tone of the notes provided considerable grounds for optimism for investors holding Sterling-denominated assets. Two members of the committee described their decision to keep domestic policy on hold for yet another month as ‘finely balanced’, in spite of the fact that the rate of British inflation, as measured by the Consumer Price Index, currently stands at zero per cent.

Alan Clark of Scotiabank summed up the feeling in the markets, commenting earlier that, ‘the only way is up for interest rates, but not yet. The tone from the MPC seems to be taking baby steps in the hawkish direction.’ The BoE minutes certainly backed-up this line of thought, noting the positive effect which the European Central Bank’s ongoing Quantitative Easing programme is having on the euroland economy – the destination for the lion’s share of the UK’s exports.

The go-ahead Bank of England notes sent the Pound Sterling euro exchange rate up to a fresh 1-month high of 1.4041 earlier on. The pair peeled back to trade briefly below the 1.4000 threshold a short time ago as speculators ‘took profit’. However, the slight correction for GBP EUR could prove to be short-term in nature following this afternoon’s disappointing whole of eurozone Consumer Confidence survey which showed at a relatively lowly -4.6 versus an anticipated -2.5. The suggestion that the initial ‘feel good’ effect of the ECB’s QE programme is now beginning to fizzle out may weigh down the shared currency for some time to come.

Meanwhile, the Pound Sterling fared equally as well against the US Dollar (currency:USD). GBP USD peaked at 1.5080 a short time ago before pulling back. Analysts forecast that the near-term retracement for this pair could have legs following a strong set of Existing Home Sales data in the States this afternoon.

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