Pound (GBP) Euro (EUR) Exchange Rate Surges but Returns to Market Positions; Forecast to Gain

June 5, 2014 - Written by John Cameron

STORY LINK Pound (GBP) Euro (EUR) Exchange Rate Surges but Returns to Market Positions; Forecast to Gain

The Pound to euro exchange rate saw a volatile few hours after the European Central Bank monetary policy announcement revealed a cut to its benchmark interest rate. The GBP EUR currency pair saw day highs of just short of 1.2400, a level not experienced for 18 months. These highs lasted just a short while with the Sterling/euro rate soon trading at levels previous to the ECB policy.

The Pound Sterling to Euro exchange rate sees modest gains on Friday (09:30), trading 0.19pct higher at 1.23274 GBP/EUR. The EUR/GBP is 0.81120.

The main event for today’s session is without a doubt the latest European Central Bank monetary policy announcement and ECB Chief Mario Draghi’s press conference which follows. With Tuesday’s whole of eurozone inflation statistics suggesting that the mainland European economy is sliding towards deflation, a loosening of monetary policy is highly likely from the ECB. Jasper Lawler of CMC Markets observed yesterday that, "it seems unlikely the ECB would disappoint in terms of action.’

Lawler went on to state that, ‘the real crunch is going to be what the ECB guides for the next meeting and beyond.’ For the euro to weaken significantly, Draghi will have to confirm during his press conference that the euroland’s central bank is on a set course to continue loosening policy – a one-off trimming of its deposit rate will simply not be enough to send the Pound Sterling euro exchange rate any significantly higher.

Elsewhere, the Pound Canadian Dollar exchange rate climbed to as high as 1.8350 GBP/CAD during yesterday’s afternoon session in spite of a relatively go-ahead assessment of the state of the domestic economy from the Bank of Canada. As anticipated, the North American reserve bank opted to maintain its key interest rate at its current level of 1.00% at its monthly meeting, but themes contained in its accompanying statement may help the Loonie going forward.

The BoC noted that domestic inflation is nearing its 2.00% target level ahead of schedule, hinting that a rate rise may be required sooner rather than later. Bank of Canada Governor Stephen Poloz additionally noted that activity levels in his nation’s consumer spending and property markets were heating up, implying that a tightening of monetary policy may be deemed desirable in coming months. For these reasons, many analysts are now forecasting that the Pound Sterling Canadian Dollar exchange rate has topped out earlier this year and the forecast for the pair heading forwards is for neutral to negative movement.

Relevant Euro Exchange Rates - 06/06/2014)

The Euro to Australian Dollar exchange rate is trading down -0.47% at 1.45796 EUR/AUD.
The Euro to Canadian Dollar exchange rate is trading down -0.29% at 1.48769 EUR/CAD.
The Euro to Czech Koruna exchange rate is trading down -0.04% at 27.48707 EUR/CZK.
The Euro to Pound Sterling exchange rate is trading down -0.19% at 0.81120 EUR/GBP.
The Euro to Hong Kong Dollar exchange rate is trading down -0.21% at 10.56787 EUR/HKD.
The Euro to Japanese Yen exchange rate is trading down -0.35% at 139.43678 EUR/JPY.
The Euro to Mexican Peso exchange rate is trading down -0.21% at 17.53906 EUR/MXN.
The Euro to Norwegian Krone exchange rate is trading down -0.41% at 8.13758 EUR/NOK.
The Euro to US Dollar exchange rate is trading down -0.21% at 1.36313 EUR/USD.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Canadian Dollar Forecasts Daily Currency Updates Euro Forecasts Eur Forecasts