BREAKING FX: Pound Sterling to Euro Exchange Rate Forecast Comes True as Interest rate Cut Boosts GBP to EUR Pairing

June 3, 2014 - Written by John Cameron

STORY LINK BREAKING FX: Pound Sterling to Euro Exchange Rate Forecast Comes True as Interest rate Cut Boosts GBP to EUR Pairing

BREAKING FX NEWS: Pound Sterling to Euro Exchange Rate Forecast Comes True as Interest rate Cut Boosts GBP to EUR Pairing - The FX market reaction to the ECB policy decision has confirmed the GBP EUR forecasts, with the pair advancing over 0.5pct within two hours of the European Central Bank's decison to slash its benchmark interest rate to just 0.15pct in hopes that it will stimulate the Euro zone economy and stave off deflation. On news of the rate cut, the Pound Sterling to Euro exchange rate rocketed up, and by 14:00 GMT was trading 0.59pct higher on the day at 1.23785 GBP/EUR.

The latest key EUR/GBP/USD exchange rates are as follows:
- The Pound Sterling to Euro exchange rate is trading up +0.59% at 1.23785 GBP/EUR.
- The Pound Sterling to US Dollar exchange rate is trading up +0.17% at 1.67667 GBP/USD.
- The Euro to US Dollar exchange rate is trading down -0.42% at 1.35450 EUR/USD.

Yesterday wasn’t thought likely to be a key day for the Pound Sterling euro exchange rate (GBP/EUR), however, that didn’t stop a couple of notable data sets surprising analysts.

UK mortgage figures impact Pound Sterling (GBP) exchange rate

The Pound Sterling (currency:GBP) endured a blow during early trading when April’s UK Mortgage Approval figures came out below par. Analysts had been expecting a slight decrease in the number of secured loans OK’d by Britain’s banks in comparison to March’s marker, however they weren’t expecting the figure to print at quite as low a level as the 62,900 which it showed at.

Judging by recent commentary from its policymakers, the Bank of England has become extremely keen to choke off the level of UK mortgage lending in order to avert a potentially catastrophic domestic property bubble. Research from economists in recent days suggests that the value of the average property in London is currently increasing by over £500 per day, so the BoE feels that urgent action is required. Yesterday’s numbers hint that the Bank is getting what it wants from its new tougher mortgage rules, but in the medium term Sterling may be the loser.

Euro (EUR) suffers on German prices contraction

However, the euro (currency:EUR) suffered an equally damaging blow during the middle part of the European equities session when Consumer Price Index data showed that German prices had once again contracted last month. Economists had expected the closely-monitored CPI number to show marginally into positive territory at 0.1%. The -0.1% result therefore came as blow to the euro; if there were any European Central Bank policymakers still umming and ahhing about whether to loosen the euroland’s monetary policy on Thursday this release may galvanised their ideas.

The likelihood of an interest rate cut and/or QE from Europe’s central bank will weigh heavily on the single currency in the near-term, according to Steven Saywell, global head of foreign-exchange strategy at BNP Paribas, who noted yesterday that the euro’s ‘main driver today is expectations for Thursday and the ECB meeting.’ Watch this space.

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TAGS: Daily Currency Updates Euro Forecasts Euro Pound Forecasts Pound Eu Forecasts