Fantasy Currency Trader (Pound to Euro) - Analysts Forecast Gains For GBP EUR Exchange Rate

October 6, 2014 - Written by John Cameron

STORY LINK Fantasy Currency Trader (Pound to Euro) - Analysts Forecast Gains For GBP EUR Exchange Rate

On 25th September, our Fantasy Currency Trader column advised that the Pound to euro exchange rate (GBP EUR) was a BUY and suggested that readers should use a block of GBP 10,000 to purchase euros from a then-current conversion rate of 1.2783.

If you had followed his recommendation, how would it have worked out?

The Pound euro exchange rate ended last week’s session at 1.2763 GBP/EUR, having touched a 26-month peak of 1.2876 GBP/EUR earlier in the week.

The single currency has remained under heavy selling pressure during the past two weeks as investors continued to fight shy of holding euro-denominated assets over concerns that the euroland economy might be hurtling towards a decimating period of deflation.

On this topic, there were a couple of relatively bright points for the EU unit last week. Monday’s latest Consumer Price Index data revealed that inflation in Germany stands at a slightly higher than expected 0.8% this month.

Meanwhile, the revelation by European Central Bank President Mario Draghi on Thursday afternoon that there would be no further regional interest rate cuts in the euro area moving forward also assisted the single currency’s cause.

However, on the debit side for the euro, Tuesday morning’s whole of eurozone inflation numbers showed that the level of price rises in the euroland had dropped from an annualised 0.4% in August to 0.3% this month.

In truth, it could have been worse for the single currency; Thursday’s confirmation from the ECB that it would not be purchasing the sovereign debt of the eurozone’s individual states as part of its expansionary monetary policy programme came as a relief, while some analysts viewed its announcement that the buying-up of ‘up to €1tn worth of Asset-Backed Securities’ over the next two years was considered a relatively muted response to the ongoing credit crisis in the euro area.

Meanwhile, on the other side of the coin, the early week revelation from leading credit ratings agency Moody’s that it was cutting the UK’s AAA sovereign debt rating, which it had possessed since 1978, anchored the Pound.

When is the best time to buy pound to euro?

We feel that with global oil prices drifting lower and with the rate of eurozone inflation sliding to close to zero percent, the ECB will have to do more on monetary policy sooner rather than later.

For his reason, we maintain our original advice to BUY the GBP EUR exchange rate with a block of GBP10,000. If you had followed our original instruction, your GBP10,000 would now be worth GBP9,984.33.

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TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts Fantasy Cu Forecasts