GBP EUR Exchange Rate Forecast - Renewed Pound to Euro Rate Gains Predicted

Modified: Saturday, 4 October 2014 14:41 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Forecast - Renewed Pound to Euro Rate Gains Predicted

Currency News UK: Our latest GBP EUR exchange rate forecasts and predictions 2014 / 2015

The main risk event today came the form of the monthly European Central Bank monetary policy announcement and the press conference from ECB Chief Mario Draghi which followed.

Most analysts had anticipated that the euro might weaken in the aftermath of the questions and answers session, but in fact the Pound Sterling euro exchange rate dropped to as low as 1.2734 GBP EUR as investors digested a raft of key comments from Draghi.

The ECB President stated that his Bank would be embarking upon a 2-year purchase programme of up to €1tn worth of Asset Backed Securities in the middle part of this month – a move which would ordinarily have set the markets against the single currency. However, in a clear case of ‘buy on the rumour., sell on the news’, the euro gained in the wake of Draghi’s words, suggesting that investors had been anticipating a larger scale scheme.

The top man at the ECB went on to affirm that his board was ‘unanimous on using additional measures if needed’, but his confirmation that there was no scope for any further interest rate cuts from the European Central Bank added to the gains for the single currency on the day.
Although the GBP EUR exchange rate dropped on the session, the move lower is by no means guaranteed to stick. This morning’s Purchasing Manager Index survey of Britain’s all-important construction sector showed a slight increase from August’s counterpart figure when analysts had been expecting a slight drop. The positive effect of this encouraging result may yet be felt by the Pound before the weekend market shutdown.

Meanwhile, the general tone of Draghi’s rhetoric remained downbeat, suggesting that the market may yet turn against the single currency once more. The ECB President observed that –

‘inflation expectations measure have gone down: medium-term inflation outlook has worsened.’
Draghi went on to state that,


‘Risks to economic outlook remain on downside. Unemployment and unutilized capacity would damp recovery’.

The outlook for the Pound euro exchange rate therefore remains positive, with the psychologically key 1.3000 GBP/EUR threshold remain a key interim target.

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