Forex Rates: Pound to Dollar Exchange Rate Outlook Is Negative, GBP EUR Steady

Modified: Tuesday, 9 July 2013 08:30 BST - Written by Ben Hughes

STORY LINK Forex Rates: Pound to Dollar Exchange Rate Outlook Is Negative, GBP EUR Steady

The Pound to euro exchange rate (currency : GBP EUR) held in a tight range either side of 1.1600 during yesterday’s session. Dovish central bank commentaries from the BoE and ECB last Thursday look to have more or less cancelled each other out, leaving many market participants somewhat surprised that the pair is not trading higher following a generally disappointing day for eurozone data releases.

Germany’s latest import / export data led the way, providing investors holding euro-denominated assets feeling more than a little concerned. The figures showed that shipments out of the Teutonic economy dropped by their largest amount for some four years due to a dip in demand from the Far East, and in particular China. On closer inspection, the German data provided further cause for concern, revealing that exports to the other sixteen nation states which comprise the eurozone had tumbled by almost 10% during May.

Elsewhere, it was a generally positive day for risk events, with New York’s Dow Jones gaining by 0.50%, London’s FTSE 100 closing up by over 1.00% and Germany’s benchmark Dax accumulating by over 2.00% on the day. The ‘risk on’ trading environment caused the Pound to US Dollar exchange rate to move higher by around 1c. Increased appetite for risk was elicited partly by the news from Brussels that the eurozone’s finance ministers had agreed to grant Greece its next tranche of bailout funding and partly by continued positive investor sentiment following last week’s suggestion by the Bank of England and the European Central Bank that the era of cheap money is a long way from being finished just yet.

However, with Egypt’s military standing accused of the widespread killing of members of erstwhile President Morsi’s Muslim Brotherhood party and with the revelation that the number of mergers and acquisitions in Japan’s economy has hit its lowest level for nine years, today’s session is far from guaranteed to be another positive one for global share markets. If equities lose ground then look for the Pound to Dollar exchange rate to also give up ground.

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