Pound euro Forecast: Analysts Trim 1.3000 GBP EUR Prediction

December 8, 2014 - Written by John Cameron

STORY LINK Pound euro Forecast: Analysts Trim 1.3000 GBP EUR Prediction

Currency News UK: Strong German Data Anchors Pound to Euro Exchange Rate

A highly encouraging set of data out of Germany on Friday ensured that the euro (currency:EUR) continued to hold its own against the Pound Sterling (currency:GBP).

The official data, which pointed to a strong month-on-month increase in the level of factory orders in the Teutonic powerhouse economy provided euro-holders with some ground for limited optimism.

The marked improvement in German factory orders, which saw a 2.5% month-on-month gain, was largely driven by increased levels of domestic demand.

Germany’s problem remains the relative lack of enthusiasm towards its exports from foreign markets and this is a factor which may take some to change.

Euro Rate Today

The Pound to Euro exchange rate today is converting at 1.26817 GBP/EUR.
The US Dollar to Euro conversion rate is 0.81400 USD/EUR.
The Australian Dollar to Euro exchange rate today is converting at 0.67673 AUD/EUR.
The New Zealand Dollar to Euro exchange rate converts at 1 NZD is 0.62765 EUR.

Euro Exchange Rate Steady Following Draghi Comments

Sentiment towards the single currency was already improved on the week following the previous day’s revelation by European Central Bank President Mario Draghi that the euroland’s policymakers will not be countenancing an escalation of the ECB’s Quantitative Easing programme until well into next year.

The Pound Sterling vs euro exchange rate sank back down to as low as 1.2620 GBP/EUR during the immediate aftermath of the release of the German factory orders data before recovering to end the week at 1.2686.

UK Inflation Expectations Tumble

Meanwhile, another factor anchoring the GBP EUR exchange rate also came to light during the final stages of last week’s trading.

It appears that the drop in the price of crude oil, coupled with comments from leading Bank of England policymakers in the last few weeks suggesting that UK inflation is likely to fall below 1.0% before next May’s election, are having an effect on UK economic participants’ beliefs.

The most recent survey of inflation expectations revealed that only 37% of British respondents expect the Bank of England (BoE) to increase Base Rate within the next twelve months.

This compares with a showing of some 49% the month before. The BoE is likely to pay close attention to this data when it makes future monetary policy decisions, the implication being that a UK interest rate hike is now further away than it has been for some time.

For this reason, analysts who were previously forecasting a break through the psychologically significant 1.3000 GBP EUR threshold for the Pound euro exchange rate may now have to wait until well into next year for such a move.

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