The Pound Sterling to Euro (GBP/EUR) exchange rate advanced to its best level in 7-years to surpass the 1.30 level as the markets continued to reel from the surprise announcements made by the Swiss national bank, heightened concerns over next weeks European Central Bank (ECB) policy meeting and the upcoming Greek general election was also continuing to weigh heavily on the Euro.
Earlier the Pound Sterling to Euro (GBP/EUR) exchange rate strengthened on Thursday and could advance to its strongest level in 7-years after the Swiss National Bank stunned the markets by slashing interest rates and ditching the Franc’s cap with the Euro.
The Euro briefly inched higher after a report showed that the German economy expanded by 1.5% in 2014, the figure marked the nation’s best annual growth performance in three years.
‘It is a strange habit of the German statistical office to release GDP data for the entire past year before actually publishing fourth quarter data. According to the just released numbers German GDP increased by 1.5% in 2014… In our view this outcome suggests that the German economy has probably grown by some 0.3% QoQ in the fourth quarter,’ said Carsten Brzeski, an economist to ING economist.
The Pound meanwhile was initially softened by concerns over the outcome of May’s general election and a report, which showed that house prices in the UK rose by their slowest annual pace since May 2013.
With the outcome of the May election in question, a number of banks have cut their forecasts for the Pound. The main cause of their concern is that the election result could lead to referendum on the UK’s membership of the European Union.
‘It’s far from clear what the outcome will be, and hanging on this election is a referendum on EU membership. No one really wants to own a currency that reflects that much uncertainty,’ said Neil Mellor a currency strategist at Bank of New York.
Swiss Decision Hammers Euro
The Euro then went into freefall against many of its major peers after the Swiss National Bank stunned investors by slashing interest rates deeper into negative territory and ditching the Swiss Franc’s cap with the Euro.
The move has heightened expectations that the European Central Bank will introduce a full-scale quantitative easing programme at next week’s policy meeting.
‘This is a complete capitulation. The pressure and belief that the European Central Bank will launch a bond buying program in the coming week – further devaluing its currency – has been enough to make the Swiss National Bank step out of the way. Nobody wins when you stand in the way of a freight train, except for the train,” said Jeremy Cook from World First.
Future Currency forecast:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound,
,Euro,1.2967 ,
