Euro to Pound Exchange Rate Close to Lowest in 16 Months; GBP/EUR Forecast Today

May 23, 2014 - Written by Ben Hughes

STORY LINK Euro to Pound Exchange Rate Close to Lowest in 16 Months; GBP/EUR Forecast Today

The Euro to Pound exchange rate (EUR/GBP) loitered at close to its lowest level for 16 months during yesterday’s trading session as the 28 nation bloc voted on its regional representatives in Brussels. The euro to Sterling exchange rate (EUR/GBP) traded in a relatively tight trading range between 0.8082 and 0.8112 on the day, but many analysts forecast that the single currency may be on the verge of registering significant losses.

Nader Naeimi of AMP Capital Investors stated yesterday that his company’s short positions on the single currency now comprise ‘one of its highest conviction positions’. Naeimi’s comments were backed-up by data from futures markets which showed that the total number of net short positions from institutional investors currently stands at 2,175.

Only a week ago, the same hedge fund managers and professional investors held over 32,000 net long positions on the euro. The turnaround has been driven by recent comments from European Central Bank chief Mario Draghi who appears hell-bent on loosening his region’s monetary policy at a time when most of the world’s other major central banks are considering Quantitative Tightening.

The growing feeling amongst the investment community that the ECB is ‘behind the curve’ with regard to its monetary policy is likely to weigh heavily on the single currency moving forward, leading analysts to forecast further gains in the medium term for the Pound Sterling against the euro. The ultimate target for GBP EUR now stands at 1.2894 – a level which the pair last visited during July 2012.

Looking at today’s data roster, there’s nothing in the way of UK data to trigger renewed movement for GBP EUR. However, this afternoon’s session brings the release of US New Home Sale data for April. If this beats expectations, sending the EUR USD exchange rate lower, then the single currency may incur further losses against the Pound Sterling via arbitrage funding.

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