Euro (EUR) Exchange Rate Outlook Improves on Deutsche (DBK.DE) Sentiment

September 30, 2016 - Written by Tim Boyer

STORY LINK Euro (EUR) Exchange Rate Outlook Improves on Deutsche (DBK.DE) Sentiment

Euro Pound Exchange Rate Rallies, GBP/EUR Drops to 1.1533

The Euro to Pound Sterling (EUR GBP) exchange rate staged an impressive comeback during late trading yesterday, sending the GBP EUR exchange rate down from rates above 1.1600 down to an intraday low of 1.1533.

Deutsche Bank Speculation Supports EUR to GBP, USD Currency Trading

The shift back into euro-denominated assets was driven by improved sentiment towards beleaguered German retail bank Deutsche Bank AG (DBK.DE). Investors have spent most of the week shifting their assets out of the bank, sending its share price down to a multi-decade low of €10.20 on Tuesday. However, yesterday’s session saw Deutsche’s shares record modest gains. Mujtaba Rahman, managing director of Eurasia Group explained this in a research note, observing that,

‘According to reports, Deutsche has set aside €5.5bn for potential fines and legal costs related to its ongoing discussions with the US Department of Justice.’

Rahman went on to assert that,

‘Given leaks the DoJ is seeking a much higher fine – in the order of €14bn – that means the banks maximum capital loss would be around €8.5bn. But Deutsche has approximately €12bn of “Cocos” – financial instruments that are designed to be converted to shares if the bank were to enter a formal resolution procedure or undergo a precautionary recapitalisation. As such, these should easily cover any capital shortfall and obviate the need for taxpayer money from Berlin.’

Euro US Dollar Exchange Rate Gains Limited by US GDP Data

Elsewhere, the US Dollar (currency : USD) was well-supported in late trade yesterday following the publication of stronger than anticipated Q2 Gross Domestic Product data. The jump from Q1’s showing of 1.1% to a year-on-year 1.4% buoyed investors and saw futures markets price-in an increased perceived likelihood of a Federal Reserve interest rate hike before the end of the year.

A November interest rate increase is considered unlikely by dint of the fact the Fed’s policy meeting that month comes just days before the US Presidential election, but there is now a 57.4% likelihood of a December hike in the US.

For this reason gains in the Euro US Dollar (EUR USD) exchange rate were comparatively limited.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Daily Currency Updates Euro Forecasts