Pound Euro Forecast

GBP/EUR exchange rates creep up over the course of the trading week

Exchange rates for the Pound improved noticeably from yesterday afternoon after the Nationwide consumer confidence survey showed a significant improvement from last months record low.  The Pound has clawed back nearly half a cent against the Euro and a similar amount against the Dollar.

However short term future movement is likely to be determined by the Bank of England Minutes next Wednesday and the UK GDP figures on the 27th as most market focus seems to be on interest rate forecasts.  Current exchange rates have been dominated by who will raise interest rates and when, with the Euro reaching a 13 month and 18 month high against the pound and Dollar respectively in the last few days following the decision to increase interest rates by the ECB.  They are anticipated to raise twice more this year, driving the Euros strength, despite sovereign debt concerns, whilst the US and now the UK expected to leave rates on hold for many months.  If the UK figures and Minutes are a little more favourable then you may see sterling claw back some ground against the Euro as interest rate rises are discussed again.  In my view whilst the Euro is currently very strong, I don’t see this strength being maintained in the longer term against the Pound as growth and debt concerns will come to dominate the PIIGS once again. If you are selling Euros I see this as a very good window because the US is also likely to outstrip the Euro zone when economic growth takes market focus