Pound Euro Exchange Rate Forecast May 2014: GBP / EUR To Hit New 16-Month High

May 9, 2014 - Written by David Woodsmith

STORY LINK Pound Euro Exchange Rate Forecast May 2014: GBP / EUR To Hit New 16-Month High

Pound Euro Exchange Rate Forecast May 2014: The Pound Euro exchange rate (GBP/EUR) put in a strong performance during yesterday’s afternoon session following comments from European Central Bank President Mario Draghi.

The top man at Europe’s central bank caused a pronounced bout of market jitters amongst investors holding the single currency when he stated during his monthly press conference that the Pound to Euro ‘exchange rate is not a target...but is a serious concern for price stability.' Draghi’s veiled threat that he may look to weaken the eurozone’s currency in order to determine levels of inflation in his region caused institutional investors to shift out of euro-denominated assets en masse.

Draghi’s confirmation that the ECB’s Governing Council had actively discussed altering its monetary policy stance at its next meeting at the start of June added to the downside pressure on the euro, sending the Pound to Euro exchange rate all the way up to 1.2242 GBP/EUR during afternoon trading yesterday.

The move to within a quarter of a cent of the pair’s 16-month high of 1.2258 GBP/EUR was significant, but a break followed by consecutive closes above this level will be required in order to confirm the pair’s uptrend which started in earnest during the middle part of last Summer. A break above this meaningful level of resistance would bring Pound Sterling to Euro’s 5 ½ year peak of 1.2894 GBP/EUR – a level which it last reached at the height of the eurozone’s sovereign debt crisis during the Summer of 2012 – firmly into view.

Elsewhere, the Pound Canadian Dollar exchange rate slumped yesterday afternoon following sustained support for the Loonie which was driven by US Federal Reserve Chair Janet Yellen’s testimony to the Senate Budget Committee in the States. Yellen reiterated that her Bank was not on a set path to reduce its Quantitative Easing programme and could pause its asset purchase taper if domestic inflation falls any further. The subsequent move caused the Pound Canadian Dollar exchange rate to dip to as low as 1.8378 GBP CAD on the day.

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