Pound Sterling Forecast 2014: GBP Exchange Rate Predicted to Trend Higher vs Euro (EUR), US Dollar (USD)

May 21, 2014 - Written by John Cameron

STORY LINK Pound Sterling Forecast 2014: GBP Exchange Rate Predicted to Trend Higher vs Euro (EUR), US Dollar (USD)

The Pound Sterling (currency:GBP) has starred in the global currency markets during today’s session, sending the Pound euro exchange rate (GBP/EUR) up to its highest level since January of last year. Sterling has also pushed up to its highest level against the Swedish Krone (currency:SEK) for two years and is threatening the multi-year high which it broke to against the US Dollar (currency:USD) a few weeks ago.

The latest Pound Sterling & Euro exchange rates are as follows:
- The Pound Australian Dollar exchange rate is trading up +0.22% at 1.82768 GBP/AUD.
- The Pound Canadian Dollar exchange rate is trading up +0.4% at 1.84447 GBP/CAD.
- The Pound Euro exchange rate is trading up +0.49% at 1.23472 GBP/EUR.
- The Pound New Zealand Dollar exchange rate is trading up +0.23% at 1.97107 GBP/NZD.
- The Pound Dollar exchange rate is trading up +0.36% at 1.68986 GBP/USD.

The break higher for the Pound was fuelled by a combination of factors; this morning’s UK retail sales increased by an annualised 7.7% last month – this rates as the strongest year-on-year increase in British shop sales for a decade.

The Pound was afforded further positive news when figures from the Council of Mortgage Lenders revealed a 12-monthly increase in the aggregate level of mortgage lending of 36% during April. The data provides Bank of England Governor Mark Carney’s recent assertion that the UK’s property market is approaching bubble territory with further credence. However, for the time being at least, sterling is enjoying strong support on the back of a buoyant domestic housing market.

The Bank of England minutes, also published this morning, suggested that a tightening of British monetary policy could be close at hand, observing that for some of the bank’s nine-man committee, ‘the monetary policy decision was becoming more balanced’. This assessment caused investors to price-in a higher percentage chance of an increased ion the Bank of England’s Base Rate as soon as the Q1 2014, sending the Pound euro exchange rate up to as high as 1.2368 earlier on.

Rob Wood, UK economist at Berenberg bank commented following the today’s releases that, "these data support our forecasts for above consensus growth and a first rate hike coming in Q1 2015. We see a 35 percent chance that the BoE hikes in Q4 2014," said.

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