Sterling Forecasts: Pound to Euro (EUR) & Dollar (USD) Exchange Rates Lower if UK Exits EU

Modified: Tuesday, 1 July 2014 22:27 BST - Written by John Cameron

STORY LINK Sterling Forecasts: Pound to Euro (EUR) & Dollar (USD) Exchange Rates Lower if UK Exits EU

Economists forecast that there could be further losses to come for both Pound to euro (GBP EUR) and dollar (GBP USD) exchange rates if political manoeuvrings suggest that the UK is about to cut its ties with the European Union.

The latter part of Friday’s session in the global markets brought a significant development for investors holding Pound Sterling (currency:GBP) denominated assets.

The latest European Union summit drew to a close with a vote on whether Jean-Claude Juncker should be endorsed as the head of the European Commission for the next five years.

Juncker, the erstwhile Luxembourg Prime Minister, is a keen proponent of further centralisation of powers away from nation states amongst the 28 member euroclub and towards Brussels.

British Prime Minister David Cameron, a noted opponent of the ceding of any further powers away from independent European states, had been fighting a lonely fight against Juncker’s ascendance to the top job at the European Commission for some time and managed to force a vote on whether the Luxembourg should be given the position.

In the end the ballot, which took place just before the weekend market shutdown, proved to be an embarrassing one for Cameron, with 26 of the 28 nations present voting in favour of Juncker as European Commission President.

The UK Premier’s only supporter was Hungary, not widely regarded as one of the region’s most powerful voices.

Analysts agree that the development makes an UK exit from the eurozone a significantly more likely prospect; the recent EU elections saw the fervently anti-European UK Independence party win the largest number of seats in Britain, suggesting that domestic voters will be at odds with Juncker’s federalist agenda.


With the UK Conservative party promising an in/out EU referendum as soon as 2017 if it wins an overall majority in next year’s general election, the possibility of a ‘Brexit’ from the euroclub now appears to be a very real one.

Negative Pound Sterling forecast should UK leave EU

Currency market participants certainly view any isolation of the UK from its major European trading partners as having a strongly negative effect on the Pound.

Leading analysts estimate that such a development would cause a slump in domestic Gross Domestic Product of between 6 and 9%.

For this reason, the Pound endured a pronounced sell-off when the news regarding the rubber-stamping of Juncker’s Presidency broke late on Friday.

The Sterling euro exchange rate dipped from an intraday high of within three quarters of a cent of its 21 month high to end the week back down at 1.2482 GBP/EUR.

Reference Pound Euro, Dollar Exchange Rate Levels - updated 01/07/2014

The Pound Sterling to Euro exchange rate is trading up +0.33% at 1.25369 GBP/EUR.
The Pound Sterling to US Dollar exchange rate is trading up +0.24% at 1.71500 GBP/USD.

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