Pound Euro Exchange Rate Forecast: GBP/EUR to Gain as Euro Predicted to Struggle

Modified: Thursday, 9 January 2014 15:44 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Forecast: GBP/EUR to Gain as Euro Predicted to Struggle

Here is the Pound Euro exchange rate forecast showing GBP/EUR to gain as the Euro currency is predicted to struggle: Mario Draghi spoke this afternoon and the euro (currency:EUR) slumped.

The Pound Sterling to Euro exchange rate is trading up +0.01% at 1.21191 GBP/EUR. The Euro to Pound Sterling exchange rate is trading down -0.02% at 0.82514 EUR/GBP.

The European Central Bank President addressed the assembled members of the press at 1330hrs this afternoon following his Bank’s announcement that it will be maintaining its key lending rate at its current record low of 0.25%. Draghi stated that the economic recovery in the euroland remains fragile and went on to spook investors holding euros by observing that political risks in the region have the potential to derail any economic improvement. The top man at Europe’s central bank had already piled pressure on the single currency during the first part of his press conference by confirming that eurozone interest rates will remain at ultra-low levels for a prolonged period of time.

Perhaps most worrying of all was Draghi’s insistence that regional inflation would remain below the 2.0% threshold for at least two years. This led to questions from reporters over whether the euro area is likely to face a period of deflation similar to that endured by Japan in recent years. His doom-laden comments are likely to stoke rumours of a renewed loosening of monetary policy from Europe’s central bank – a move which would weigh heavily on the single currency moving forward.

The market’s initial response to Draghi’s words saw the GBP EUR exchange rate break to a fresh 12-month high of 1.2150 earlier, eclipsing yesterday’s high and confirming the extant uptrend for the pair. The Bank of England announced no change to its monetary policy earlier this afternoon – a move which was widely expected. The BoE’s failure to issue an accompanying ‘Forward Guidance’ statement ensured that today’s session has been a broadly Sterling-neutral one. However, the euro is forecast to struggle against the rest of the sixteen most actively traded global currencies following the damaging comments from Marion Draghi earlier today. The next threshold to look for heading higher for GBP EUR comes at 1.2368 – a level last reached on 3rd January 2013.

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