Pound Sterling Euro Exchange Rate Forecast to Fall GBP EUR

Modified: Thursday, 4 June 2015 15:15 BST - Written by John Cameron

STORY LINK Pound Sterling Euro Exchange Rate Forecast to Fall GBP EUR

The near-term improvement for the euro (currency:EUR) continued during yesterday’s session, with investors showing an increasing willingness to hold the shared currency ahead of Friday’s International Monetary Fund (IMF) debt repayment deadline.

The improved sentiment towards the eurozone unit sent the Pound Sterling euro exchange rate down into the 1.3500s GBP EUR for the first time since May 7th – the date of this year’s UK General Election, when conventional wisdom dictated that Britain was on the verge of an uncertain result followed by weeks of political horse-trading. The pair has now tumbled from a near 3-month peak of 1.4173, which it reached on 27th May, to a fresh 4-week low as the positive effect of the Conservatives’ unexpected clear-cut victory at the polls begins to wane.

However, the move higher for the EUR GBP exchange rate is by no means guaranteed to hold into today if yesterday’s comments from Greece’s left-wing Syriza leadership are to be believed. An official Syriza spokesman asserted yesterday, referring to the latest payment of €300m due to the IMF tomorrow, that, ‘if there is no prospect of a deal by Friday or Monday, I don't know by when exactly, we will not pay’.

However, one of Syriza’s euro MPs took a different view of proceedings, stating that, ‘if the lenders show the same realism that the Greek government and the Greek Prime Minister is showing, then we can have a deal in principle by Friday or before Friday.’ Dimitris Papadimoulis appeared confident that an agreement will be reached between Athens and it’s creditors to unlock the final €7.2bn tranche of emergency funding previously agreed with the ECB / EU / IF Troika. The market appeared to believe him.

Looking ahead, today’s highlights include the latest Bank of England (BoE) monetary policy decision and weekly jobs data in the US. The BoE announcement is likely to prove a damp squib, with investors almost universally forecasting a maintenance of Base Rate at its current record low of 0.50%, but the American labour market numbers could prove market-moving for the Pound Sterling US Dollar exchange rate GBP USD.

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