Exchange Rate Forecast / Predictions 2014 Pound Euro (GBP/EUR) & Pound Dollar (GBP/USD)

Modified: Tuesday, 24 December 2013 13:44 BST - Written by Ben Hughes

STORY LINK Exchange Rate Forecast / Predictions 2014 Pound Euro (GBP/EUR) & Pound Dollar (GBP/USD)

As 2013 draws to a close, the Pound euro exchange rate (GBP/EUR) stands almost exactly where it was when the European Central Bank cuts its key lending rate to a new record low back in the first week of November. Other things being equal, such a move from Europe’s reserve bank would ordinarily be expected to cause the single currency to tumble in value against the other majors, particularly as the cut was accompanied by extremely dovish rhetoric from ECB President Mario Draghi.

Recent statements from the top man at the ECB suggesting that the next move from his bank might be another interest rate cut and that the mechanisms are in place for negative interest rates in the mainland Europe next year bode ill for the eurozone’s unit. If inflationary pressures remain low in the euroland throughout Q1 and into Q2, then look for a further loosening of monetary policy from the region’s policymakers. For this reason, the GBP EUR exchange rate is forecast to trend upwards next year with its ultimate medium term target coming at July 2012’s peak of 1.2894.

The Pound US Dollar exchange rate (GBP/USD) has staged a concerted recovery in the markets since it dropped to 1.4814 back in July. At that stage, investors were certain that the US Federal Reserve’s Quantitative Easing programme was on its last legs following comments from Fed Chairman Ben Bernanke stating that a tapering of America’s asset purchase would begin soon. In the end, market participants had to wait until a few days ago for the first cut to QE. Given that there’s a new woman at the helm of the Fed as of 1st February, and that that woman – Janet Yellen - was one of the original architects of the US central bank’s bond purchase scheme, any further reductions to QE may be some time off. If this proves to be the case, then look for Cable to break higher towards August 2009’s 62-month high of 1.7042. Consecutive closes above this level would be likely to start up market babble regarding a return to the two to one level last seen in April 2008.

Relevant Pound Sterling, Euro & Dollar Exchange Rates (Publish: 24/12/2013 13:30 GMT)

The Pound Sterling / Euro exchange rate is trading up +0.25% at 1.19659 GBP/EUR.
The Pound Sterling / South African Rand exchange rate is trading up +0.13% at 16.92675 GBP/ZAR.
The Euro to British Pound exchange rate is trading down -0.25% at 0.83571 EUR/GBP.
The Euro to US Dollar exchange rate is trading down -0.15% at 1.36768 EUR/USD.
The US Dollar to Euro exchange rate is trading up +0.15% at 0.73117 USD/EUR.
The US Dollar to British Pound exchange rate is trading down -0.1% at 0.61104 USD/GBP.

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