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Pound Sterling to Euro (GBP EUR) Exchange Rate Forecast Mixed on US News

June 14, 2016 - Written by James Fuller

The near-future could bring a major shift in the current GBP-EUR exchange rate, as if US central bank officials speak in favour of an early rate hike, the USD can be expected to rise and the Pound to fall in the pairing by comparison.

UK Consumer Prices Miss Estimates but British Pound Attracted Steady Support



Today’s centrepiece data release in the UK missed expectations to the downside, but the Pound Sterling (currency : GBP) has still attracted steady support on the session. Analysts had forecast that this morning’s domestic Consumer Price Index inflation data for May would show a slight increase from April’s counterpart year-on-year print of 0.3%. In the end, when the result was published, it showed at exactly the same level as the previous edition.

Ordinarily, this outcome would have negatively impacted on market participants’ British interest rate expectations – a move which, in turn, would hurt Sterling - but these are not ordinary times.

The Pound climbed back above the 1.2600 GBP EUR threshold against the euro (currency : GBP) during the aftermath of the release, topping out at an intraday peak of 1.2642.

The move suggests that investors were encouraged by the prospect of a continuation of the ‘easy money’ environment which the Bank of England (BoE) has fostered since the global credit crisis – a move which is generally supportive to the UK economy.

Yield on Bench Mark German 10-year Bonds Dropped into Negative Territory



Elsewhere, this morning’s trading session has brought notable news from the euroland’s premier economy.

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For the first time in history, the yield on bench mark German 10-year bonds dropped into negative territory as investors sought out the safest of safe havens.

Ulrich Kater of DeKaBank was clear on the underlying reason for the flight to safety, stating earlier that, ‘a huge driving factor... is the heightened uncertainty over a possible Brexit, which is driving investors into the safe haven of German sovereign bonds. The drop in yields below the zero mark once again shows the immense challenges currently facing global financial markets.’

With nine days to go until voting takes place in the UK European Union Membership referendum, the future prospects for the Pound appear decidedly mixed.
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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts

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