Euro Forecast - British Pound to Euro Exchange Rate (GBP/EUR) is Predicted to Trend Lower

August 12, 2014 - Written by John Cameron

STORY LINK Euro Forecast - British Pound to Euro Exchange Rate (GBP/EUR) is Predicted to Trend Lower

Currency News UK: The euro gave up ground against the Pound Sterling and the US Dollar during Tuesday’s session, sending the GBP EUR exchange rate Northwards to 1.2581 during the early part of today’s US equities session.

Meanwhile, the euro to dollar exchange rate slid to 1.3334 – marginally above its key level of support at 1.3333 which it struck during the first week of this month. A break below this key threshold would signal the pair’s lowest trading rat since last November.

The shift out of euro-denominated assets was driven by a worrying ZEW index of German economic participants which revealed that confidence levels in the euroland’s number one economy have plummeted to their lowest level since 2012.

The news raised fears amongst investors holding euro-denominated assets that the euro area may be about to slide into a decimating deflationary cycle similar to that suffered by Japan following its banking crisis which broke almost 20 years ago.

Falling prices, accompanied by falling levels of confidence, stifled entrepreneurial spirit and investment in Asia’s second economy; the psychological effect appears to have sapped a generation of young Japanese of their willingness to take economic risks.

Analysts are increasingly suggesting that an all-out bout of Quantitative Easing may be needed to kick start economic activity in mainland Europe; Robert Sinche of Pierpont Securities concurred, stating that, ‘there is decreasing degrees of freedom for the ECB -- they’ve pulled about as many conventional levers as they can.’

Elsewhere, tomorrow afternoon’s US Advance Retail Sales figures will be closely-monitored by investors holding the Buck. As with recent data sets from the States, a strong showing from the July shop sales numbers will serve to convince a rump of market participants that a Federal Reserve interest rate hike is imminent, favouring the US Dollar. In such a circumstance, look for EUR USD to break down through to a fresh 9-month high sooner rather than later.

The other major risk event in the markets tomorrow comes in the form of the latest Quarterly Inflation Report from the Bank of England, penned in for publication at 1030hrs tomorrow morning. Any suggestion from the Bank that it will be looking to increase its key interest rate before Christmas will be likely to propel the pound Sterling to fresh highs against the euro.

Latest Euro Exchange Rates - Updated 22:30 GMT 13/08/2014

The Euro to Australian Dollar exchange rate is trading down -0.4% at 1.43633 EUR/AUD.
The Euro to Canadian Dollar exchange rate is trading down -0.12% at 1.45867 EUR/CAD.
The Euro to Pound exchange rate is trading up +0.69% at 0.80073 EUR/GBP.
The Euro to New Zealand Dollar exchange rate is trading down -0.37% at 1.58041 EUR/NZD.
The Euro to Lira exchange rate is trading down -0.36% at 2.88175 EUR/TRY.
The Euro to Dollar exchange rate is trading down -0% at 1.33645 EUR/USD.
The Euro to Rand exchange rate is trading down -0.6% at 14.12416 EUR/ZAR.

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