Pound Sterling Euro Forecast: GBP EUR Exchange Rate Predicted Losses

March 11, 2014 - Written by John Cameron

STORY LINK Pound Sterling Euro Forecast: GBP EUR Exchange Rate Predicted Losses

In the absence of any tier one data releases from the UK or the eurozone, you might have expected yesterday’s session to be a quiet one for the Pound Sterling to Euro exchange rate GBP/EUR. If you did, you were wrong, because the pair moved steadily lower during the day, falling to as low as 1.1972 GBP/EUR during the final stretch of the European equities session.

The Pound Sterling to Euro exchange rate is trading up +0.05% at 1.19967 GBP/EUR. The Euro to Pound Sterling exchange rate is trading down -0.05% at 0.83356 EUR/GBP.

The sole economic statistic of note during the session was this month’s eurozone Sentix Investor Confidence survey which showed at a mildly disappointing 13.9 versus analysts expectations of a 14.0 print – clearly this was not the driver behind the shift lower for the Pound Euro exchange rate.

It appears likely that the downward break for Sterling Euro rate on the day represented a continuation of the move which began last Thursday afternoon when European Central Bank President Mario Draghi issued a relatively upbeat assessment of the future prospects of the Euroland economy which included an upward revision to the ECB’s 2014 GDP growth forecast. Draghi’s emphatic dismissal of any analysis suggesting that the region was in danger of slipping into a damaging period of deflation caused institutional investors to move back into euro-denominated en masse as a consequence.

Yesterday’s broad selling pressure on the Pound Sterling was also attributable in part to comments from Charles Bean, the Bank of England’s Deputy Governor, who stated during a speech in Northern England that any further increase in the value of the Pound would hamper the UK economy. Bean observed that Sterling had risen by 10% against a basket of the currencies of the UK’s major trading partners during the past twelve months, and that any further accumulation for the Pound would subdue demand for UK exports and make foreign imports a more attractive prospect for British shoppers. The market dislikes nothing more than public comments bemoaning the value of the domestic currency from Central Bankers, so these words from such a senior BoE official are likely to weigh down the Pound in the short to medium term. If GBP EUR continues to trend lower, the next stop heading southwards may be mid-December’s 4-month nadir of 1.1811.

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