Euro / Pound Exchange Rate Forecast to Fall to 0.70 by BNP Paribas
- Written by: Gary Howes
The EUR/GBP exchange rate is expected to fall - despite the period of impressive strength we are now seeing in the euro rate complex.
The British pound has traded in subdued fashion over the course of August / September 2015, allowing the EURGBP pair to trade between 0.72 and 0.74 with a distinct upside bias.
October looks no better for the pound as the euro pushes the EURGBP higher above the 0.74 threshold and potentially into a new, higher, range.
The pound has struggled as expectations concerning interest rate rises at the Bank of England continue to be pushed back in time.
When the Bank chooses to be more agressive on interest rates will upside pressure to the sterling exchange rate complex return.
The problem for those hoping for a stronger pound is that market pricing for the Bank of England remains dovish with the majority seeing the first rate rise coming months into 2016.
This is an excessively dovish assumption made by the markets argues Charlotta Pühringer at BNP Paribas who says their assumption is for a February rate rise.
From a short-term perspective, the statement accompanying Thursday’s policy decision will be important, "any indication that more members are moving towards voting for hikes or an additional ‘yes’ vote would be supportive of the GBP," says Pühringer.
BNP Paribas remain long GBPAUD and short EURGBP in our cash recommendations portfolio.
"We see significant scope for further EURGBP downside, and enter a short EURGBP spot position at 0.7395, targeting 0.7000 with a stop-loss of 0.7510," say BNP Paribas.
Meanwhile, risks to the downside for the euro continue to grow with BNP expecting the ECB to respond to a stronger EUR with more easing, and see scope for EURGBP to move lower as a result.
Latest Pound/Euro Exchange Rates
  | Live: 1.1459▲ + 0.14%12 Month Best:1.2162 |
*Your Bank's Retail Rate
| 1.1069 - 1.1115 |
**Independent Specialist | 1.1299 - 1.1344 Find out why this is a better rate |
* Bank rates according to latest IMTI data.
** RationalFX dealing desk quotation.
