Euro to Pound (EUR GBP) Exchange Rate Forecast to Decline on EU Banking Problems

Modified: Sunday, 13 July 2014 12:37 BST - Written by John Cameron

STORY LINK Euro to Pound (EUR GBP) Exchange Rate Forecast to Decline on EU Banking Problems

Eurozone banking stress tests continue to hurt the euro to pound (EUR GBP) exchange rate and global stock markets during the end of week trading session.

The panic which followed the news yesterday that the parent company of Portugal’s Banco Espirito Santo had missed a short term debt repayment sent equities markets into a tailspin.

Espirito Santo’s shares lost almost a fifth of their value on the day before local regulators suspended trading in them, while banking sector equities in general shipped support.

The widespread shift out of risk also sent the world’s major global indices sharply lower, with Frankfurt’s benchmark Dax index shedding almost 1.5% of its value on the day. Meanwhile, the larger cap Eurostoxx 50 closed down by an even greater amount.

GBP/EUR Hovers Around 1.25

Losses for the euro were fairly limited during European trading hours, with the Pound Sterling to euro exchange rate GBP/EUR spending virtually the whole day in the 1.2500s.

However, the pair broke back into the 1.2600s during the middle part of yesterday’s New York session and there could be further gains to come today as investors adjust their euro-denominated positions ahead of the weekend market shutdown. Losses for GBP EUR would surely have been of a greater magnitude if it were not for an alarmingly weak set of import / export figures published in the UK yesterday morning which pointed to a monthly trade gap of almost €10bn.

However, Adrian Miller of GMP Securities warned investors that matters could deteriorate for the single currency in the short to medium term if, ‘the Portuguese situation continue to deteriorate, risk aversion contagion could quickly spread to other euro zone member states’ bonds and other asset classes.’


Will we See the Pound to Euro Exchange Rate Hit 1.3?

The threat of such a situation arising, along with the European Central Bank’s assertion that it will be sticking to its ultra-loose monetary policy stance for years to comes threatens to send the GBP EUR exchange rate Northwards into the 1.3000s sooner rather than later.

Veronica Pechlaner of Ashburton Ltd. also warned that the single currency and investor sentiment remained at risk, observing yesterday that, ‘we’ve seen a lot of money go into the periphery earlier this year, and banks have a fairly big weighting in those regions. As investors revisit their positions, sentiment can turn quite quickly.’

Euro Exchange Rates Today - Updated 13/07/2014

The Euro to Australian Dollar exchange rate is 1.44883 EUR/AUD.
The Euro to Canadian Dollar exchange rate is 1.46092 EUR/CAD.
The Euro to Pound exchange rate is 0.79541 EUR/GBP.
The Euro to Hong Kong Dollar exchange rate is 10.54564 EUR/HKD.
The Euro to NZ Dollar exchange rate is 1.54354 EUR/NZD.
The Euro to Turkish Lira exchange rate is 2.88172 EUR/TRY.
The Euro to Dollar exchange rate is 1.36072 EUR/USD.
The Euro to Rand exchange rate is 14.56597 EUR/ZAR.

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