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British Pound to Euro Forecast - The GBP/EUR Exchange Rate Jumps Following ECB QE Announcement

September 4, 2014 - Written by John Cameron

STORY LINK British Pound to Euro Forecast - The GBP/EUR Exchange Rate Jumps Following ECB QE Announcement


An unexpected announcement from the ECB has sent the British Pound to euro exchange rate (GBP/EUR) sharply higher this afternoon. Analysts forecast that there could be further gains to come for GBP EUR if the pair breaks through a key level of technical resistance.

Support for the euro (currency:EUR) has slumped during the middle part of today’s session, thanks to comments and actions from the European Central Bank (ECB).

The euroland’s reserve bank surprised the markets with its latest policy announcement, which came at 1245hrs BST today.

A quick market overview (updated 06/09/2014):

- The Pound Sterling to Euro exchange rate is trading 1.26053 GBP/EUR.
- The Euro to US Dollar exchange rate is 1.29513 EUR/USD.
- The US Dollar to Euro exchange rate is 0.77213 USD/EUR.
- The US Dollar to Pound Sterling exchange rate is 0.61254 USD/GBP.

Analysts had been anticipating a ‘no change’ decision from the ECB’s board, so the revelation that they would be trimming all three of their key interest rates came as quite a surprise, triggering an instant move out of euro-denominated assets. The shift sent the Pound euro exchange rate back above the 1.2600 GBP/EUR threshold.

There was worse news to come for investors holding euro-denominated assets when the Bank’s Chief Mario Draghi took to the lectern for his latest monthly press conference at 1330hrs BST.


Draghi wasted no time in informing the collected members of the press that the ECB will begin a programme of Quantitative Easing next month.

The details of the credit expansion scheme will be provided after the ECB’s meeting on 2nd October, but given that the euroland’s central bank announced that it was cutting its GDP growth forecast for this year and next, it would appear likely that this will be a large scale programme along the lines of the Federal Reserve and Bank of England’s similar policies of recent years.

In another move which is likely to harm the single currency, Draghi also announced that the ECB is trimming its regional inflation forecast for 2014 from a previous 0.7% to an even more lowly 0.6%.

Although Draghi also mentioned that today’s decision from his board was not unanimous, the news will almost inevitably send the Pound Sterling euro exchange rate GBP EUR sharply Northwards during coming sessions.

Most analysts now forecast that GBP EUR will threaten its 6-year high of 1.2894 sooner rather later. Consecutive closes above this level would mean that there were no recent levels of technical resistance for the pair heading higher, making further gains highly likely.

In a minor footnote to today’s main event, the Bank of England opted to maintain its current monetary policy stance which has been in place for over four years now. Investors waiting for the Bank’s next move on interest rates are likely to have to wait until next year.



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TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts Pound Euro Forecasts

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