Pound Rises Again Ahead of Tomorrow’s Interest Rate Decision (Matthew Vassallo)

Pound to Dollar Rate Slides to 1.38

The Pound has made further inroads against the EUR and USD over the past couple of days, as the feel good factor around the UK economy continues. Positive Manufacturing Production data this morning has only reinforced this belief and last week’s EUR strength now seems like a distant memory. The Pound initially surged against the EUR following worse than expected Eurozone unemployment figures and the trend has continued into this week, with further positive data releases bringing market confidence rushing back to the Pound.

Due to how quickly market sentiment is changing, forecasting GBP/EUR over the coming months will be challenging. However, it does seem as if Sterling is once again gaining momentum as it moves back towards the 1.20 level, with many clients still holding out in the hope that it does. Whether we do see GBP/EUR rates hit 1.20 in the short-term, could be dependent on the outcome of tomorrow’s Bank of England (BoE) and European Central Bank (ECB) interest rate decision and ECB President Mario Draghi’s subsequent press conference.

Whilst it is widely anticipated that the BoE will keep our base interest rate on hold at 0.5% and the ECB will do the same, with theirs remaining at 0.75%. However due to the on-going economic problems within the Eurozone region and inflation falling a long way below their desired 2%, it may be that we hear of hints at a future rate cut for the Eurozone, perhaps even before the end of 2013. Either way anyone with a GBP/EUR requirement should be keeping a close eye on tomorrow’s announcements, as any deviation from the expected results is likely to cause additional market volatility.

GBP has also gained ground against the USD, just as it seemed the USD was starting to claw back some of the ground it has lost over the past few month. The USD has struggled to make any serious inroads as issues over the debt ceiling continue to restrict their economies ability to move forward. There was also a wide expectation that the FED would start to taper their asset purchasing scheme, which would indicate an economy returning to health. However, this did not occur and this has also caused investors to move away from what is usually considered the main ‘safe haven’ currency during times of global unrest. I do believe we will see the USD recover ground against GBP sooner rather than later and as soon as the current issues have been resolved it is likely we will see a consistent move back towards 1.55.

If you have an upcoming currency requirement and are keen to discuss the current market conditions and forecasts on your desired currency pair, then please feel free to contact me directly at [email protected]. Alternatively you can contact one of our experienced team on 0044 1494 787 478.