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GBP EUR Forecast: Pound Euro Exchange Rate Lower on Eve of Fed Policy Meeting

Euro Currency Forecast

Pound Sterling (GDP) and the Euro (EUR) made gains against the US Dollar (USD) as market bets against a Fed hike in interest rates increased ahead of the central bank’s next policy meeting.

After a drop on Friday the Pound made narrow gains against the Euro (GBP EUR) as the markets looked to take advantage of the low exchange rate, however with little data to sustain this increase, confidence in Sterling fell once again causing  the exchange rate to drop to a five week low of 1.1589 on Tuesday.

Euro Continues to Strengthen Against Dollar (EUR/USD) as Market Bets against Rate Hike Increase

The Euro to US Dollar (EUR USD) exchange rate was gaining ahead of Wednesday’s Federal Reserve meeting, which analysts predict will not see the interest rate rise past the current 0.5% despite comments by Fed Chairwoman Janet Yellen earlier in the year.

The resulting selloff of the ‘Greenback’ has seen increased demand for other currencies, with the single currency being one of the beneficiaries and the EUR USD exchange rate hitting 1.1207 early on Tuesday.

Eurozone data showed that European construction saw an increase from 0.3% to 1.8% in July. While the Eurozone current account report for July fell to 21b from 29.6b, neither release did much to effect the market on Monday.

A warning from the Bundesbank monthly report on the slowing of the German economy in the 3rd quarter applied slight pressure on the common currency, but it also did not cause any major changes in Euro (EUR) exchange rates.

Pound Sterling (GBP) Exchange Rates Still Struggling due to the Uncertainly of ‘Brexit’

Despite a slight rebound on Monday thanks to a weakened US Dollar (USD) and house price data by Rightmove showing a recovery from -1.2% to 0.7%, the Pound still continues its downtrend of last week against the Euro (GBP EUR).

Investors are continuing to be dovish towards Pound Sterling (GBP) exchange rates in light of recent hints that the UK could lose its access to its European financial services sector passport rights due to fallout from ‘Brexit’. Treasury Select Committee chairman Andrew Tyrie said in a statement today;

The publication of public sector borrowing is due on Wednesday and is expected to show an increase in borrowing of 10.4b following the previous  decline of -1.5b. Should the rate of borrowing be higher that this figure the Pound is likely to take another hit, while conversely a lower rate would cause it to strengthen.

Current GBP EUR Exchange Rates

At the time of writing the GBP/EUR exchange rate was trending around 1.1600 and the EUR/GBP exchange rate was trending around 0.8618

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