Euro to Pound Sterling exchange Rate Outlook - EUR GBP Remains Bleak

Modified: Monday, 5 January 2015 23:24 BST - Written by John Cameron

STORY LINK Euro to Pound Sterling exchange Rate Outlook - EUR GBP Remains Bleak

The Pound Sterling (currency:GBP) has lost a little ground against the euro (currency:EUR) during today’s trading session in spite of a dual threat to the single currency.

The GBP EUR exchange rate briefly changed hands at above the 1.2800 threshold during early trading, but the pair edged downwards to touch off an intraday low of 1.2744 as the day wore on, largely thanks to a highly disappointing PMI survey of the UK’s construction sector which showed at 57.6 – far below anlaysts’ expectations of a 59.0 print.

The GBP EUR exchange rate was also weighed down by a far stronger than anticipated whole of eurozone Sentix Investor Confidence survey which unexpectedly showed an improvement in sentiment amongst economic participants in the troubled region. Even though the fundamentals on the day held back GBP EUR, it appears likely that the pair will record renewed gains as the month wears on thanks to concerns over the outcome of Greece’s general election and the ever-present danger that the European central Bank will be broadening the remit of its Quantitative Easing programme to include sovereign debt purchases.

This morning’s German Consumer Price Index inflation data would appear to make a loosening of its monetary policy from the ECB a more likely event. The price rise numbers from the euroland’s number on economy showed that the pace of inflation had remained at 0.0% last month. If Wednesday’s whole of eurozone CPI inflation numbers suggest that the pace of euroland price rises stands at or below zero, then investors are likely to factor-in an extremely high chance that the euroland’s reserve bank will be loosening its monetary policy on 22nd January.

Concerns that all-out QE from the ECB may be just weeks away, in combination with fears that Greece’s electorate may vote in an anti-bailout party at the upcoming general election, have sent the single currency down to its lowest level in some nine years against the US Dollar (currency:USD) today. Sean Callow of Westpac speculated earlier today that there may be further losses to come for EUR USD, stating that, ‘the euro was so close to such a keenly watched round number as $1.20 that we didn’t need any fresh news to tip us over the cliff today, it just needed a little bit of a nudge. Even so, the scale of the move was still surprising. It was pretty wild.’ The forecast for the single currency remains bleak.

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