Gains Forecast For GBP EUR Exchange Rate

Published: Monday, 17 February 2014 09:00 BST - Written by James Fuller

STORY LINK Gains Forecast For GBP EUR Exchange Rate

The Pound euro exchange rate (GBP/EUR) ended last week’s session firmly on the front foot, re-establishing itself above the 1.2200 threshold just prior to Friday night’s market shutdown. Stronger than anticipated German, French and whole of eurozone Gross Domestic Product numbers were not enough to stop the single currency’s slide during the final session of the week.

The weekend market close brought a brace of significant developments for the pair which may affect its level into the medium term, with comments from European Commission President Jose Manuel Barroso in particular potentially proving supportive to the Pound. The EC’s top policymaker was emphatic in his rejection of the idea that, should the Scottish people opt to leave the United Kingdom later this year then it would be "extremely difficult, if not impossible" for Scotland to join the European Union as an independent state. Barroso opined that any breakaway Scottish state would not automatically be accepted as a part of the euroland because of its status as a former constituent part of the UK. Instead, it would need to re-apply for EU membership and gain unanimous approval from all current EU member states. The development will surely make a ‘yes’ vote a less likely outcome in September’s popular ballot, strengthening the Pound.

Later yesterday, the Bank of England Governor Mark Carney confirmed his belief that conditions in the UK property market are improving. The Canadian chief of the UK central bank described the steady rise in British house prices over the past twelve months as a ‘generalised phenomenon’ phenomenon, providing Sterling with a much-needed fillip. Significantly, Carney went on to suggest that there was little his Bank could do in order to halt the steady rise in prices, which has been driven by a strong forward move in the London market. He described this particular sector as being resistant to UK interest rate hikes due to the large number of buyers who are not dependent on mortgages to finance their purchases.

Given these ostensibly Sterling-positive weekend developments, many analysts now forecast that GBP EUR may head northwards to a new 13-month high above 1.2243 sooner rather than later. Such an upshift would confirm the pair’s extant uptrend, sending out a strong positive indicator.

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