FX News Now: Pound Sterling Euro Exchange Rate Surges on Carney Interest Rate Forecast

July 17, 2015 - Written by John Cameron

STORY LINK FX News Now: Pound Sterling Euro Exchange Rate Surges on Carney Interest Rate Forecast

BoE Rate Hike Comments Drive GBP-EUR to Best Conversion Rate

Bank of England Governor Mark Carney stole the headlines during late trading in the global currency markets yesterday when he stated in a set piece speech that his Bank’s interest rates could be on the way upwards ‘around the turn of the year’.

The Top Man at the UK’s central bank told all those who would listen that, ‘it would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages.’ Carney went on to state that, ‘in my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.’

Pound Sterling to Euro Exchange Rate Jumps to 7 1/2 Year High Today

The comments on their own were enough to see the Pound Sterling euro exchange rate reverse some of the slight losses which it incurred during the middle part of yesterday’s European session and by close of business in New York, the pair had pushed on to a fresh 7 ½ year high of close to the 1.4400 level.

GBP to EUR, USD Conversion Rate Gains Predicted to be Limited

However, the BoE Governor’s suggestion that this round of policy tightening might end when in about three years’ time with Base Rate topping out, ‘at about half as high as historical averages,’ is likely to limit the gains for Sterling moving forward. The promise of a series of gradual increases leading to a moderate cost of borrowing than has previously been the norm is hardly likely to encourage a flood of inward investment from institutional investors seeking yield.

Currency Market Forecast and Exchange Rate News: ECB Decision Impacts Euro Exchange Rate

Elsewhere, yesterday’s confirmation from the European Central Bank that it had raised the level of emergency funding it was making available to Greece’s retail banks via Emergency Liquidity Assistance (ELA) to some €900m for one week came as music to the ears of economic participants in the debt-addled Hellenic state. The European Central Bank President Mario Draghi observed that, ‘it's uncontroversial that debt relief is necessary and I think that nobody has ever disputed that,’ and analysts forecast that the improvement in sentiment towards the shared currency which follows could send the euro US Dollar exchange rate higher once more EUR USD.

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TAGS: Daily Currency Updates Dollar Pound Forecasts Euro Forecasts