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Pound Sterling to Euro Exchange Rate Forecast: GBP/EUR Back to Best Rate as FOMC Hints at 2015 Hike

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Pound Sterling to Euro Exchange Rate Returns to Two-Month Best

After the Federal Open Market Committee (FOMC) delivered its interest rate decision the Pound Sterling to Euro (GBP/EUR) exchange rate returned to trending around a two-month high.

Demand for the Euro declined as the US Dollar spiked following the Fed’s hints that the central bank does intend to increase interest rates in 2015.

With December highlighted as the month for an adjustment, the US Dollar rallied across the board and drove the GBP/EUR exchange rate all the way to 1.3997.

Today Germany’s unemployment data could cause additional GBP/EUR movement.

The Pound Sterling to Euro (GBP/EUR) exchange rate could fall away from its recent over two-month high later today if the Federal Open Market Committee (FOMC) delivers a dovish policy statement.

GBP/EUR Exchange Rate News: UK GDP Sends Pound Sterling to Euro Lower

On Tuesday the Pound Sterling to Euro (GBP/EUR) exchange rate gave up some of its recent gains in the face of slightly disappointing third quarter UK growth data.

The pace of expansion had been expected to slow, but the decline from 0.7% in the second quarter to 0.5% in the third was steeper-than-forecast and resulted in a lower annual growth rate of 2.3%.

While the fact that the UK economy continues to expand at a moderate pace is a positive, the report is unlikely to give the Bank of England (BoE) much motivation for bringing forward its timeline for increasing interest rates.

HSBC said that the GDP result added weight; ‘to the argument of the Monetary Policy Committee (MPC) doves that there is still insufficient price pressure to be sure that inflation will rise back to target. But today’s number is not a game changer. Services growth was only slightly weaker than we expected and there is little evidence that this is a trend. If construction growth bounces back, GDP growth could easily pick up again in Q4.’

The Pound Sterling to Euro (GBP/EUR) exchange rate achieved a high of 1.3884

Euro to Pound Sterling (EUR/GBP) Exchange Rate Recouping ECB QE Losses Despite Volkswagen News

Although the Pound went on to recoup most of its losses before the close of the European session, the GBP/EUR currency pair remained trending down on the highs achieved last week in the wake of the European Central Bank’s (ECB) latest policy statement.

With the ECB adopting a decidedly dovish tone and intimating that the central bank is prepared to review its current stimulus measures in order to boost growth and increase domestic price pressures, the Euro plummeted against the majority of its rivals.

However, speculation surrounding the upcoming Federal Open Market Committee (FOMC) interest rate announcement has seen the Euro move away from the lows struck in the immediate aftermath of the ECB commentary.

As the EUR/USD currency pair is the world’s most traded, the performance of one of the assets has a direct correlation with the performance of the other. So, if the US Dollar were to plummet in response to a dovish statement from the FOMC, the Euro could rally across the board.

The EUR/GBP exchange rate was even able to gain on Wednesday despite Volkswagen recording a 3.48 billion Euro operating loss as a result of the emissions scandal.

The German GfK gauge of Consumer Confidence was also shown to have eased from 9.6 to 9.4 in November.

In a statement published with the figure GfK said; ‘The good mood seen among consumers in recent months is slowing waning. As last month, economic expectations have fallen sharply, apparently under the influence of the ongoing refugee crisis. That will be the third monthly decline in a row and brings the barometer to the lowest level since February.’

The Euro to Pound Sterling (EUR/GBP) exchange rate achieved a high of 0.7234

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Euro Could Fall if FOMC Confirms 2015 Rate Hike

With UK data lacking today, global economic developments will be the main cause of movement in the GBP/EUR exchange rate, with the biggest market-mover set to be the Federal Open Market Committee’s (FOMC) interest rate announcement.

If the Fed flies in the face of the recent run of disappointing US data and opts to increase borrowing costs the US Dollar is likely to surge across the board.

A hint that that central bank still intends to adjust interest rates in 2015 would also be ‘Greenback’ supportive. However, should the Fed indicate that record low interest rates will remain in place until next year, the US Dollar may slide and drive the Euro higher against peers like the Pound by default.

The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3829, the Pound Sterling to US Dollar exchange rate (GBP/USD) exchange rate was trading in the region of 1.5295.