GBP to Euro FORECAST: Pound Exchange Rate vs EUR Gains Predicted, US Dollar to Strengthen

July 3, 2014 - Written by John Cameron

STORY LINK GBP to Euro FORECAST: Pound Exchange Rate vs EUR Gains Predicted, US Dollar to Strengthen

As forecasts predicted, the Euro exchange rate came under yet more pressure today, seeing losses against the Pound Sterling and US Dollar after the latest ECB event.

The ECB Chief once again made use of forward guidance in his post-announcement press conference, confirming that his Bank will keep its key lending rate at its current ultra-low levels, ‘for an extended period of time’.

Draghi went on to give an idea on the scale of the ECB’s targeted loans programme, announced last month, suggesting that up to €1 trillion could be made available to the euroland’s retail banks.

Draghi also hinted that this massive injection of liquidity could be just the start of a programme which is bound to kick-start lending in the region.

Increased Euros sees EUR forecast to weaken

However, the massive increased supply of euros is likely to cause the single currency to leak support during coming months. Analysts predict that this has the potential to send the Pound euro exchange rate up towards its key level of support just below the 1.2900 threshold.

Strong US labour market data, published earlier today, thrashed expectations, sending the world’s leading currency pair sharply lower.

The monthly US Non-Farm Payrolls figure, considered by economists to be the most significant regular data release in the markets, is usually published on the first Friday of each month.

With Independence Day tomorrow, the July edition of the closely-monitored data was released this afternoon.

Analysts had been anticipating the job creation number to show that the world’s leading economy had added just over 200,000 jobs last month, so the actual showing of 288,000 was highly positive for the US Dollar (currency:USD).

Overall US joblessness figures, published at the same time, showed that the overall level of joblessness had fallen to 6.1% last month – again this was an unexpected result – analysts had been expecting the headline labour market figure to remain static at 6.3%.

The highly encouraging American jobs numbers caused investors to alter their expectations regarding the timing of the Federal Reserve’s next domestic interest rate increase.

US Dollar forecast to see further gains

The development had investors queuing up to forecast further gains for the US Dollar, with Robert Sinche of Pierpont Securities stating that, ‘these kind of numbers are the ones that have to get some attention even at the Fed.

It’s a well-deserved increase in the dollar although I think there’s a lot more to go.’ The knee-jerk response from the markets saw the Pound to Dollar (GBP/USD) exchange rate drop down to 1.7146, while the Euro to Dollar gave up half a percentage point to trade as low as 1.3594 EUR/USD.

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TAGS: American Dollar Forecasts Currency Predictions Dollar Poun Forecasts