Euro (EUR) to Pound Sterling (GBP) & US Dollar (USD) Rate Forecasts, Exchange Rates Predicted To Fall Further

Modified: Monday, 4 August 2014 15:30 BST - Written by John Cameron

STORY LINK Euro (EUR) to Pound Sterling (GBP) & US Dollar (USD) Rate Forecasts, Exchange Rates Predicted To Fall Further

Currency News UK: Euro to Pound Sterling (EUR/GBP) and US Dollar (EUR/USD) Rate Forecasts, Exchange Rates Predicted To Fall Further - Today’s session has brought news of potential debt problems for a major eurozone bank and an African nation state, but the markets remained relatively unfazed.

Last week’s sovereign debt default by Argentina on $1.3bn of its bonds caused a pronounced attack of the jitters amongst investors, so an independent observer might have expected today’s developments to sap investors of their appetite for risk.

However, the news that Portugal was set to inject almost €5bn of capital into its biggest retail bank, Banco Esopirito Santo, barely raised an eyebrow.

So where are the foreign exchange markets set today:

- The euro to pound exchange rate is -0.15 per cent lower at 0.79689 EUR/GBP.
- The euro to dollar exchange rate is -0.05 per cent lower at 1.34208 EUR/USD.
- The dollar to euro exchange rate is +0.05 per cent higher at 0.74511.

Equally, market participants remained sanguine in the face of the news that Ghana is seeking help from the International Monetary Fund to bolster its balance sheet.

The VIX ‘fear index’ was trading down by over 2.00% on the day by the time New York re-opened, suggesting that investors consider these to be contained and relatively controllable problems. The news from the Middle East that Israel considers that its stated aim of destroying the maze of tunnels used by Hamas to surreptitiously enter its territory has almost been achieved and a withdrawal of its land troops from the Gaza is imminent helped improve investor sentiment on the session.


Elsewhere, perhaps the single most significant risk event this week comes in the form of Thursday’s European Central Bank policy announcement and Mario Draghi’s press conference which follows. If, as appears likely, ECB Chief Mario Draghi elects to once again put the boot into the single currency, then look for the Pound Sterling euro exchange rate to climbed back up towards its 22-month high which it touched off last month.

When you run the numbers, it appears likely that speculators have been adjusting their positions for such an eventuality over the past two weeks. The latest figures from Washington-based Commodity Futures Trading Commission reveal that bets that the single currency will lose ground against the US Dollar reached their highest level for two years during the final session of last week. The number of ‘net shorts’ on the euro declining stood at 108,075 on the 29th July – significantly up from the 88,823 of the week before.

Valentin Marinov of Citibank concurs with this, observing earlier that, ‘the downside risk for the euro persists, and our view is that the currency has further to go. The euro weakness was driven mostly by the ECB’s policy and we expect more from the central bank. Their task is far from done.’

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