GBP/EUR Rates Likely to Stay Volatile (Matthew Vassallo)

Pound to Euro Forecast - Leadership Contest Drives GBP/EUR Rate Lower

GBP/EUR exchange rates have continued to cause investors headaches, with the pair showing little signs of reversing the recent trend. Prior to Christmas we were used to seeing small daily movements, yet since the start of 2013 we have seen the currency pair spike by well over a cent in less than 12 hours, on multiple occasions.

This means forecasting becomes increasingly difficult, with positions being lost and gained extremely quickly. It also means that any developing market trends are harder to pinpoint as one week it seems as if the EUR is rallying, only for negative reports to surface inside the eurozone which reverse the trend. Similarly the Pound has come under pressure against all the major currencies during the last 10 weeks but has still managed to claw back a couple of cents against the euro, despite a run of negative economic data and a stagnant UK economy.

What we can say for certain is that both the UK and eurozone economies are struggling amid poor growth forecasts, record trade deficits and high unemployment. Whilst both economies continue to stagnate it is difficult for the markets to decide which is recovering at a better pace, or whether either is at all. It seems that each new week brings a new viewpoint or story and depending on who you speak to at any given time, you will hear mixed reports on whether it is actually the UK or eurozone that are starting showing signs of economic recovery.

Personally I expect the recent volatility to continue on GBP/EUR as we move through Q1 of this year. I do not expect rates to reach 1.20 for the forseeable future any trade opprtunities around 1.17 should be seriously considered, considering the recent pressure the Pound has found itself under and the fact that the majority of the forecasts on the pair are indicating a fall below 1.10 over the coming months.

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