GBP/EUR + GBP/USD Forecasts: What's Future for the Pound to Euro and US Dollar Currencies?

August 20, 2014 - Written by Toni Johnson

STORY LINK GBP/EUR + GBP/USD Forecasts: What's Future for the Pound to Euro and US Dollar Currencies?

Further gains had been forecast for the Pound to euro (GBP/EUR) and US Dollar (GBP/USD) following Wednesday’s news of a split vote decision on interest rates from the Bank of England. Meanwhile, analysts’ forecast for the US Dollar depend on upcoming commentary from Fed Chair Janet Yellen.

The Pound Sterling enjoyed steady support throughout the mid-week session following the publication of the minutes of the most recent Bank of England policy meeting.

So where does Sterling stand in today's currency markets? (revised 22/08/2014)

- The pound to australian dollar exchange rate is -0.16 per cent lower at 1.77954.
- The pound to euro exchange rate is +0.06 per cent higher at 1.24925.
- The pound to dollar exchange rate is -0.01 per cent lower at 1.65764.

The memos revealed that, for the first time since Mark Carney took over the helm at the ‘Old Lady of Threadneedle Street’ during the middle part of last year, the nine-man committee failed to record a unanimous decision on interest rates.

The vote of 7-2 in favour of keeping the UK’s monetary policy ‘as is’ led investors to infer that a UK interest rate hike is now not far off. The two dissenting MPC members were Martin Weale and Ian McCafferty, who both voted for a 25 basis point increase in Base Rate to 0.75%.

The development was not wholly unexpected and the fact that it was already partly factored-in was reflected in price action for the Sterling-based pairs which followed.

The Pound euro exchange rate (GBP/EUR) climbed from an intraday low of 1.2471 up to as high as 1.2543 earlier on, while the Pound US Dollar exchange rate (GBP/USD) moved higher off the 1.6597 platform which it had dropped to during early trading all the way up to 1.6679 a short time ago.

Short-Term Pound to Dollar Exchange Rate Forecast

The near-term forecast for the GBP USD exchange rate is likely to be determined by the publication of the minutes of last month’s Federal Reserve FOMC policy meeting and by the press conference which follows it tonight; if Fed Chair Janet Yellen puts a firm timescale on when her central bank will be tightening its monetary policy, then look for levels on GBP USD to alter.

Looking ahead, the Jackson Hole monetary policy symposium, where Janet Yellen is due to make a set piece speech on Friday, will also almost inevitably be market-moving.

Famously, Yellen’s predecessor in the hotseat at the Fed Ben Bernanke, made public comments at the 2007 edition of the annual get-together which sent global stock markets sharply higher. Steven Englander of Citigroup believes that the chances of the current Fed Chief making similar statement are limited; Englander stated earlier that, ‘we worry that dovishness is increasingly anticipated and that by the time we get to her talk anything less than ‘full dovishness’ will be a disappointment.’ As ever with the global currency markets, ‘buy on the rumour, sell on the news’.

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