Has Pound Sterling Euro Exchange Rate GBP EUR Bottomed Out?

Published: Tuesday, 19 January 2016 07:00 BST - Written by James Fuller

STORY LINK Has Pound Sterling Euro Exchange Rate GBP EUR Bottomed Out?

GBP to EUR Exchange Rate Tumbled to 12-Month Low Last Week

The Pound Sterling euro exchange rate tumbled to its lowest level for a year just before the weekend market shutdown. The pair dipped to a fresh 12-month low of 1.3013 GBP EUR late on Friday as investors priced-in the real and present danger that the UK will be leaving the European Union.

Another downbeat performance for oil prices yesterday kept the pressure firmly on the Pound; the correlation between Sterling and global oil prices remains strong, with most analysts suggesting that a UK interest rate hike remains an impossibility while the price of a barrel of ‘Black Gold’ is falling.

France in State of 'Economic Emergency' Weighed on Euro Demand Yesterday

However, yesterday’s session provided one reason for limited optimism for investors needing to sell the Pound and buy the euro in the short term. France remains the euroland’s second largest constituent economy by some distance, so comments from the Gallic state’s President Francois Hollande suggesting that his nation remains in a ‘economic emergency’ raised alarm bells for holders of the single currency.

The French leader went on to assert to the business leaders which he was addressing that, ‘our country has been faced with structural unemployment for two to three decades and this requires that creating jobs becomes our one and only fight,’ before telling them that their nation faces an, ‘uncertain economic climate and persistent unemployment.’

Hollande also used his set-piece speech to outline plans for a €2bn job creation plan aimed at stopping France from dropping back into recession, but fears amongst investors persist that the European Central Bank (ECB) will need to expand its €60bn per month Quantitative Easing programme in order to steer the single currency zone away from a deflation-fuelled depression. Such a move would surely weaken the shared currency.

GBP/EUR Conversion Rate Recovered Above 1.3150 Following Hallande's Comments

Hollande’s comments did cause a little wobble for the euro during the middle part of the day, sending the GBP EUR exchange rate briefly back above the 1.3150 threshold. However, the pair lacked the momentum to push back above the 1.3200 threshold. Investors will discover more regaining the ECB’s immediate plans on Thursday when the eurozone central bank issues its latest monetary policy statement.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts