Pound Dollar Exchange Rate Forecast To Drop, GBP EUR Closes Up

Modified: Wednesday, 10 July 2013 09:06 BST - Written by Tim Boyer

STORY LINK Pound Dollar Exchange Rate Forecast To Drop, GBP EUR Closes Up

And then there were eighteen. Yesterday’s session brought the news that tiny Baltic state Latvia had been accepted into the euroclub by the eurogroup of Finance Ministers. Latvia will adopt the single currency at the start of 2014 and the European Central Bank has confirmed that the exchange rate will be set at 0.702804 Lats to the euro.

The development was not universally welcomed by investors holding euro-denominated assets; with fears persisting regarding the creditworthiness of several of the eurozone’s smaller existing nation states, concerns have been raised that Latvia is the next debt accident waiting to happen. These worries meant that the single currency struggled to push on versus the Pound yesterday, allowing the Sterling to euro exchange rate to bounce to as high as 1.1644 GBP/USD just before the North American equities close.

The Pound to Euro exchange rate (GBP EUR) was given a further push forward by yesterday afternoon’s news that the International Monetary Fund had upped its 2013 UK GDP growth forecast from its previous estimate of 0.7% to an almost respectable 0.9%. The Sterling-positive news was backed up by the latest NIESR GDP forecast for the UK economy which predicted that British economic activity had climbed to a quarterly 0.6% in June. If this level of growth was replicated on an annualised basis then the UK would be set to enjoy an annualised growth rate of some 2.4%. Traditionally economists have considered a year-on-year growth figure of 3.0% as being a healthy level, so the figures add credence to the theory that the UK economy is healing.

Looking ahead to today’s session, the centrepiece data release comes this evening with the publication of the minutes of June’s US Federal Reserve FOMC meeting. It would appear that conditions in America’s job market are firming, leaving a strong possibility that the minutes will suggest that the US Quantitative Easing experiment is nearing a conclusion. Any suggestion of this could send the Pound Dollar exchange rate (currency : GBP USD) down towards its key level of support at 1.4270.

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