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GBP/EUR Exchange Rate Forecast to Strengthen as Draghi Hints at Further QE


The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.2% on Tuesday afternoon, reversing earlier losses.

The single currency depreciation is most likely the combination of hints from ECB President Mario Draghi regarding the expansion of asset purchases, as well as tumbling European stock values.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3149.


Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Decline on Concerning Global Economic Conditions

The Pound Sterling to Euro (GBP/EUR) exchange rate softened by around -0.3% on Tuesday morning.

As the British Pound tracks the global equities rout, thanks to renewed sensitivity to risk, Sterling exchange rates mostly declined. Many analysts are concerned that the poor health of the global economy will make Bank of England (BoE) policymakers even more reluctant to hike the overnight cash rate. This, combined with EU referendum uncertainty and weak domestic inflation and wage growth, has caused many to predict that the BoE will not look to hike rates until 2017. With a complete absence of domestic data to provoke changes today, the British Pound is likely to hold losses versus most of its major peers.

Compounding speculation of long-term delays to tighter BoE policy outlook was Monetary Policy Committee (MPC) member Kristin Forbes, who stated that the falling price of oil has given the bank more time to hold the cash rate at its current accommodative level.

‘Tightening monetary policy today would require faith that our forecasting models will work and the tightness in labour market quantities and measures of labour market churn will soon translate into stronger wages,’ she said. ‘The most recent falls in oil prices, by delaying the recovery in inflation, provide the luxury of a bit more time to build this confidence,’ the US academic added.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3088.

Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast to Gain on Draghi Speech

Yesterday saw a speech from European Central Bank (ECB) President Mario Draghi. The Italian central banker defended the ECB’s policy outlook, insisting that the current program of quantitative easing will return inflation back to target. Draghi rejected claims that the very low benchmark interest rate is encouraging risk-taking. Draghi’s insistence that the current policy outlook is supporting a domestic recovery, which has been mostly clouded by global economic woes, saw the Euro initially strengthen. However, many analysts are concerned that Draghi’s insistence that QE is having a positive impact could see the central bank expand asset purchases.

‘Meeting our objective is about credibility. If a central bank sets an objective, it can’t just move the goalposts when it misses it,’ he said in a speech in Germany. ‘Confidence comes from every party fulfilling its mandate. And that’s what the ECB will do.’

‘Though low interest rates can encourage risk-taking, there are no warning signs of serious financial instability,’ he added.

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.3038 during Tuesday’s European session.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: US Consumer Confidence to Provoke Changes

Given the complete absence of both British and European data today, there is the potential for the GBP/EUR exchange rate to hold losses. However, given EUR/USD negative correlation, there is a high chance of Euro changes in response to US data with specific reference to the influential, market-moving US Consumer Confidence report.

Wednesday is likely to see significant GBP/EUR volatility with British housing data and German consumer confidence data due for publication. In addition, there is the potential for heightened market volatility in response to China’s Industrial profits and Consumer Sentiment data.

The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3129 during Tuesday’s European session.