GBP EUR Exchange Rate Drops, Losses Forecast For GBP USD

Modified: Wednesday, 5 February 2014 17:57 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Drops, Losses Forecast For GBP USD

Interesting comments from Fed policymaker Charles Plosser just after yesterday’s European market close had a pronounced effect on the Pound US Dollar exchange rate (GBP/USD). Philadelphia Fed President Plosser delivered a speech containing a go-ahead assessment of the state of the US economy, predicting that the overall level of joblessness in the States will drop below the Fed’s long-held target threshold of 6.5% before Summer begins. Plosser’s accompanying assertion saw the man from the Fed call for a complete cessation to the controversial US Quantitative Easing programme before the end of the first half of 2014.

The Fed has trimmed QE by a conservative $10bn at both December and January’s policy meetings; extrapolating this level of tapering, it will take the US Central Bank until September to completely phase-out the scheme. The Pound US Dollar exchange rate (GBP USD) tumbled to as low as 1.6248 as Plosser spoke. If the Fed’s FOMC were to fall-in behind the man from Philadelphia, then a rapid retracement towards the psychologically key 1.5000 threshold would be the most likely outcome for Cable.

Looking ahead, today’s session in the global currency markets is packed with tier one risk events. German Factory Orders data, penned in for publication at 1100hrs GMT, leads the way. Yesterday’s session saw the Pound euro exchange rate (GBP/EUR) briefly slide below the 1.2000 level before recovering marginally later on, so a strong showing from the Teutonic figure could readily send the pair lower once more. Any talk of a eurozone version of Quantitative Easing from European Central Bank President Mario Draghi during his 1330hrs press conference would be likely to send GBP EUR sharply northwards from the 1.2000 threshold. It would appear unlikely that the Bank of England will do anything to alter the relative value of Sterling when it makes its latest policy announcement at 1200hrs.

Meanwhile, US Initial Jobless Claims data, also set for release this afternoon, are likely to provide investors with an early read on the likely outcome of tomorrow’s all-important January’s Non-Farm Payrolls and overall unemployment data.

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