Foreign Exchange Rate Forecasts: Pound to Euro Outlook Improves, Pound to Dollar To Gain

Modified: Friday, 12 July 2013 10:05 BST - Written by Tim Boyer

STORY LINK Foreign Exchange Rate Forecasts: Pound to Euro Outlook Improves, Pound to Dollar To Gain

The German Finance Minister Wolfgang Schaeuble has made as name for himself as a reliable source of controversy in recent month. The Teutonic policymaker re-enforced his image as a colourful figure during yesterday’s session with a succession of public comments regarding the European Union’s plans to introduce a mechanism for an authority to manage the winding down of eurozone banks which go bust. Most market participants greeted the EU’s proposals positively, with the general consensus being that a move by Europe’s central bank to address the ‘too big to fail’ problem in the banking sector was a good thing. However Herr Schaeuble begged to differ yesterday, describing it as being ‘built on sand’ and suggesting that the European Union did not have the clout to decide whether or not to close banks with credit problems on its own.

Schaeuble’s words appeared to be yet another example of Germany flexing its muscles and attempting to assert itself against an EU which German voters are increasingly viewing with distrust. The fact that Germany is set to hold a general election in September adds to this impression. Either way, the Pound to euro exchange rate (currency : GBP EUR) registered decent gains as yesterday afternoon’s session progressed. The pair briefly broke above the 1.1600 threshold just before the end of the European equities session.

Perhaps the key risk event of note today comes in the form of the latest Michigan Sentiment Index in the US. The regional gauge of confidence is expected to show an increase on last month’s print of 84.1. Anything other than an uptick in the monthly figure will add to the perceived wisdom amongst investors that the Federal Reserve’s Quantitative Easing programme is here to stay. Any such outcome would be likely to send the Pound Dollar exchange rate (currency : GBP USD) up towards the middle 1.50s.

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