Euro Pound Exchange Rate (EUR/GBP) Pushes Higher Today as Sterling Forecasts Await BoE

Modified: Wednesday, 18 June 2014 10:59 BST - Written by James Fuller

STORY LINK Euro Pound Exchange Rate (EUR/GBP) Pushes Higher Today as Sterling Forecasts Await BoE

Euro to Pound Rate Today: Over the course of last week the Euro Pound exchange rate was pushed to a 19-month low as the diverging outlooks of the Bank of England and European Central Bank saw investors favour Sterling.

While the ECB is introducing unprecedented stimulus measures and considering adopting quantitative easing, the Bank of England is preparing to start increasing interest rates within the next six months.

As of Tuesday 17th June, the Euro Pound exchange rate has lost yesterday's gains and is trading down 0.14pct at 0.79855 EUR/GBP. The Euro Dollar exchange rate is also trading down on the day (0.12pct) at 1.35591.

Last week BoE Governor Mark Carney asserted that borrowing costs could be hiked earlier than currently projected. Although the BoE had previously stressed that borrowing costs would remain on hold until the spring of 2015, industry experts are now expecting that the first rate increase will take place in November. Carney’s comments were additionally supported after BoE Deputy Governor Charlie Bean seconded the necessity of raising the benchmark rate.

Pound Sterling bullish as Bean stokes rate speculation

Carney’s second in command announced that if rates were to be increased it would be a sign that the UK’s economic recovery is broad-based and sustainable, and that things are finally returning to normal after a prolonged period of financial stress.

In Bean’s opinion the raising of interest rates would be a symbolic gesture and one which he would welcome. The hawkish commentary helped the Pound maintain a bullish relationship with its main currency counterparts and prompted this response from forex strategist Josh O’Byrne;

‘We continue to be constructive on Sterling, especially against the Euro, where the monetary policy cycles are continuing to diverge. Carney was more hawkish than expected and you saw an upward revision in rates markets. This morning we’ve seen rates tick up further still and the Pound generally supported.’


Euro to Pound exchange rate trades lower on house prices

On Monday the Euro Pound exchange rate (EUR/GBP) continued trading lower following the release of the UK’s Rightmove house price report. The data revealed that the asking prices for London-based properties eased back from record levels in June, with values in the capital slipping by 0.5 per cent in their first decline for 2014. Rightmove official Miles Shipside said this of the development; ‘Parts of the London market are starting to run out of steam. It’s an example to the rest of the country of what happens when affordability and common sense get stretched too far.’

The Euro remained under pressure at the outset of the week as figures compiled by Eurostat confirmed that the Eurozone’s consumer price index advanced by just 0.5 per cent in May, year-on-year. The month-on-month inflation figure was revised from a decline of 0.1 per cent to an increase of 0.1 per cent but the threat of deflation remains a very real concern and today’s figures are unlikely to dissuade the ECB from adopting quantitative easing style stimulus measures further down the line. The report detailed a 2.1 per cent annual decline in prices in Greece and a 0.3 per cent dip in Portugal, and the fact that consumer price gains are slowing in Germany (the Eurozone’s largest economy) is weighing on positive sentiment for the Euro.

Euro Pound Rate Forecast to Continue trading around 0.7980 this Week

While it is expected that persistent BoE rate hike speculation and ongoing economic concerns in the Eurozone will keep the EUR/GBP pairing trending lower this week, there are several influential economic reports scheduled for publication which could have a notable impact on the Euro to Pound exchange rate. For example, considerable fluctuations could be occasioned by the UK’s consumer price index and the ZEW economic sentiment surveys for Germany and the Eurozone.

It has been predicted that the ZEW current situation gauge for Germany held at 62.1 in June while the measure of economic sentiment in the nation jumped from 33.1 to 35.0. If these results fall short of forecasts, or if the Eurozone’s economic sentiment survey disappoints, the Euro could extend declines against the Pound. More movement could take place on Wednesday as minutes from the latest Bank of England policy meeting are published and Eurozone construction output figures are released.

Before the weekend the UK’s retail sales data will be in the spotlight and investors will be focusing on the Eurozone’s consumer confidence report.

The top Pound Sterling & Euro exchange rates, updated 17/06/2014

The Euro to Pound Sterling exchange rate is trading down -0.15% at 0.79841 EUR/GBP.
The Euro to US Dollar exchange rate is trading down -0.14% at 1.35572 EUR/USD.
The Pound Sterling to Euro exchange rate is trading up +0.15% at 1.25249 GBP/EUR.
The US Dollar to Euro exchange rate is trading up +0.14% at 0.73762 USD/EUR.
The Australian Dollar to Euro exchange rate is trading down -0.28% at 0.68985 AUD/EUR.

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