UK unemployment pushed GBP/EUR to a 6 month high, good time to buy Euros? GBP/EUR, GBP/USD and GBP/NZD exchange rate forecast (Mike Vaughan)

Sterling exchange rates moved passed the 1.19 level against the Euro for the first time since January following improved unemployment data shifting from 7.8% to 7.7% and closer to the 7% target set by Mark Carney to trigger a potential rise in interest rates. This brings the pounds gains against the single currency to over 5 cents since the beginning of August, a difference of €10,300 on a £200k money exchange in a little over 5 weeks, showing how volatile the market can be.

Other moves of note has seen the pound gain 3 ½ cents against the USD since the end of August but a fall of some 2.6% against the Australian Dollar (4 ½ cents) during the same period.

GBP/EUR

With levels at the best since January, for me this is real opportunity for anyone buying Euros. The situation with GBP/EUR is proving very difficult to forecast as we have a situation with UK data improving, but also a central bank keen on keeping the value of sterling under check to help improve exports with our biggest trading partner, Europe.

For this reason, and should the pound continue to strengthen against the Euro, then the Bank of England may look to de-value sterling – possibly through hinting at further QE. Because of this I would expect current levels to be nearing a peak and anyone selling Euros may get more value in the coming weeks with a correction towards 1.17.

Anyone looking at this pair today should watch out for the European Central Bank’s monthly inflation report this morning at 09:00 and a speech from Mario Draghi at 12:40. This will give clues as to future monetary policy; any positive sentiment and the Euro may strengthen this afternoon.

GBP/USD

Exchange Rates For me I believe the current levels for cable represent a good buy opportunity. With signs the US economy is improving (all be it not at the pace the FED would wish) suggests the FED may will go ahead with the ‘tapering’ of QE; the problem for USD sellers is when?

Bernanke had quelled rumours in previous weeks that the FED will continue with this stance by suggesting it will adopt and wait and see approach to see if economic data continued to show improvement. For me I feel there is a real chance the FED will continue as planned and the 17th September should be a date in anyone’s diary with an interest in the greenback. This is the next scheduled meeting of the FED and could cause some significant losses for GBP/USD should tapering begin.

Anyone with an interest in the dollar short term should watch out for US retails sales figures tomorrow at 13:30, expected to show a slight improvement, something that is likely to strengthen the dollar tomorrow afternoon.

NZD

Overnight the Reserve Bank of New Zealand released its latest interest rate decision with levels remaining on hold at 2.5% as expected. Following its release the accompanying statement from the RBNZ gave hints to future interest rates hikes citing the potential for rapid house price inflation as a concern. It has been suggested rates will remain on hold for the rest of 2013 with hikes expected next year. As a result the kiwi has strengthened overnight, something that may continue long term if the RBNZ look to raise rates next year.

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