Pound to euro Forecast: Bounce Predicted for GBP-EUR Exchange Rate

May 1, 2015 - Written by John Cameron

STORY LINK Pound to euro Forecast: Bounce Predicted for GBP-EUR Exchange Rate

Analysts forecast that yesterday’s forward move for the EURO (currency:EUR) against the other sixteen most widely traded global currencies could prove short-lived.

Comments from eurogroup leader Jeroen Dijsselbloem late in the day confirming that the euroland’s policymakers have put in place a contingency plan for a possible Greek exit from the single currency is likely to ring in the ears of investors for many sessions to come. Dijsselbloem, who is also the Dutch Finance Minister, was quizzed by reporters on the thorny subject of preparations for the debt-addled Hellenic state breaking away from the shared currency and emphatically stated that,

‘The question is, is the Netherlands prepared, or is the eurozone prepared for eventualities. The answer to that is ‘yes’.’

Meanwhile, a report from the British financial press suggesting that as many as 2m elderly Greeks had failed to be paid their weekly pension was dismissed by the Hellenic state’s policymakers as a ‘technical glitch’. Some commentators suggested that the development might be more significant and could mark the beginnings of a crack in the Greek debt dam.

Elsewhere, leading credit agency Moody’s was equally wary of the potential knock-on effects of the tense Greek debt stand-off. Moody’s noted that it is pricing in a higher likelihood of Greece defaulting the longer the uneasy negotiations continue and observed that,

‘The direct economic and financial impact of a Greek exit from the euro area would be small, but an exit would undermine the euro area’s longer-term resilience somewhat and could yet trigger a more immediate confidence shock, disrupting government debt markets’.

Looking at the overall picture, most analysts forecast renewed gains for the pound Sterling euro exchange rate in the near-term. The major threat to a fresh shift Northwards for GBP EUR remains next Thursday’s UK General Election – if the pollsters are to be believed, the result will yield a hung parliament and Sterling could ship support due to the uncertainty which this outcome engenders.

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