Volkswagen (VLKA.F) Scandal Improves Pound Sterling Euro Exchange Rate Forecast GBP EUR

September 23, 2015 - Written by David Woodsmith

STORY LINK Volkswagen (VLKA.F) Scandal Improves Pound Sterling Euro Exchange Rate Forecast GBP EUR

Pound ALERT: GBP-EUR Hits One-Month Best Rate

The Pound Sterling (currency : GBP) spiked to its highest level against the euro (currency : EUR) since 21st August during yesterday morning’s session in the global currency markets.

Volkswagen Scandal Weighs on Euro (EUR) Exchange Rate Forecast

The GBP EUR exchange rate topped out at 1.3895 shortly after the European equities market’s opening bell – the move against the single currency was viewed by many analysts as being driven by the continued sharp drop in the price of Volkswagen (VLKA.F) shares on Frankfurt’s benchmark Dax share market. Volkswagen’s stock opened on Monday morning at 150.0, having ended last week’s session at just above the 180.0 threshold. The drop of almost 20% during the first trading session of the week was replicated yesterday, with the Teutonic behemoth’s share price dropping to close to the 120.0 threshold for the first time since the middle part of 2012.

Forex Predictions: Could Euro Fall against US Dollar, Pound

The hefty losses for Volkswagen were triggered by the weekend revelation that the German car manufacturer had installed a ‘defeat device’ allowing VW cars to emit reduced levels of gases under test conditions, giving them a competitive advantage over their rivals. Whilst market participants noted comments from VW Group President and CEO Michael Horn that the company is, ‘working at full speed to clarify irregularities’ and his protestations that he is ‘endlessly sorry’ for rigging ‘a particular software used in diesel engines’, they were more concerned about the €6.5bn which his company is having to set aside to cover the estimated costs of dealing with the situation.

GBP to EUR Conversion Rate Could Return to 2015 Best Levels

With a turbulent period of trading forecast for Volkswagen shares, many analysts believe that the euro (currency : EUR) will suffer as a side-effect. The Pound euro exchange rate struck its 7 ½ year high of 1.4417 GBP EUR on 17th July of this year. The pair appeared overbought at this time and the technical correction which followed, in tandem with the news that Greece had negotiated a third bailout package with its creditors, sent GBP EUR down to 1.3472 - its lowest level for some 4-months - during the final week of last month. Analysts now forecast that the Volkswagen scandal has the potential to propel GBP EUR back up towards July’s multi-year high once more.

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