Pound Euro Forecast 2014: GBP EUR Exchange Rate Mixed Outlook

May 23, 2014 - Written by John Cameron

STORY LINK Pound Euro Forecast 2014: GBP EUR Exchange Rate Mixed Outlook

For the third day in succession, the Sterling euro exchange rate (GBP/EUR) has struck another fresh high today. The move up to 1.2374 marginally eclipsed yesterday’s peak of 1.2371 and Wednesday’s 1.2368.

The three consecutive closes above the pair’s previous 16-month high of 1.2358 over the past three days send out a strong positive signal for GBP EUR, however today’s session has not been devoid of positive developments for the single currency.

The news that leading credit ratings agency Fitch had raised its rating on Greece’s national debt from B- to B suggests that mainland Europe’s credit crisis may be nearing a conclusion. It was fears over the eurozone’s debt-addled peripheral nations, and in particular Greece, which caused a run against the single currency during the Summer of 2012. The fact that Greece’s once broken economy is showing signs of returning to normality represents a major boon for the euro and has the potential to send the Pound euro exchange rate GBP/EUR lower in the near-term.

However, there was also bad news for the euro on the day, following the publication of a report from the widely-respected Organisation for Economic Cooperation and Development (OECD) which warned that the euro will have to endure years of sustained selling pressure unless the European Union introduces a raft of economic reforms. The OECD was particularly concerned at the apparent lack of a genuine single market across the eurozone. The barriers to trade which still exist stop Europe’s major nations trading freely with each other and until this is remedied, the single currency is likely to suffer. The OECD’s missive concluded that, ‘most of the eurozone remains stifled by cumbersome administrative regulations, rigid labour markets and high operating costs’. If the OECD’s forecast is correct, then the Pound Sterling euro exchange rate is likely to climb towards the 5 ½ year high of 1.2894 which it struck in July 2012.

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