Pound Dollar Forecast Higher, Euro Dollar Outlook Remains Negative: Exchange Rates Forecasts LATEST

In mid-week trade we see the pound sterling has fallen sharply following Bank of England Governor Carney's testimony before parliament:

• The pound dollar exchange rate (GBP/USD) is 0.16 pct lower on a daily basis at 1.6958.
• The euro pound exchange rate (EUR/GBP) is 0.24 pct higher at 0.8030.
• The euro dollar exchange rate (EUR/USD) is 0.06 pct higher at 1.3615.

Please be aware that the above mid-market quotes are subject to a discretionary spread levied by your bank. An independent FX provider will however seek to undercut your bank's offer and in some instances can deliver up to 5% more currency on execution. To learn more, please read here. 

Update: Carney & Co. Sink GBP rates

Bank of England governor Mark Carney provided few new clues to the prospect of an upcoming rise in UK interest rates as he and his senior team at the Bank of England gave evidence to the Treasury Select Committee today. 

He cautioned that he may have underestimated the amount of spare capacity in the job market and markets took this as a cue that he is not actually in too much of a hurry to raise interest rates.

This is all the more baffling if we consider the hawkish tone struck at last week's Mansion House speech where he warned markets were expecting the first rate hike to come later than the Bank intends. The news sent sterling exchange rates rocketing higher.

The softer-tone today has had exactly the opposite effect. Looking at the big picture the UK central bank is well ahead of its US and EU peers on this issue and ultimately dips in GBP should be shallow.

Pound dollar rate forecasts: Could GBP/USD Hit 1.71?

GBP/USD hit its highest level since October 2008 this week past after the release of retail sales. As mentioned, Mark Carney is today's key event risk, we believe he is unlikely to backtrack from his Mansion House stance that rates could go up earlier than the market thought. This could further support GBP.

The pair now looks well established above the 1.70 level.

What about the outlook for GBP/USD? The latest predictions from the analysts at ICN Financial suggest further gains are possible:

"The upside move continued and stabilised above 113% correction, favouring an attempt to breach 127.2% correction today.

"Stabilising above 1.7035 favours the attempt to break above 1.7080, and breaching the latter triggers another bullish wave targeting the golden ratio 161.8% correction at 1.7185.

"Linear Regression Indicators are positive and AROON Indicator is showing the bullish strength.

"MACD is trading positively supporting the possibility of extending the upside move. Only a break below 1.6930 cancels positivity, but we will depend intraday today on 1.6960 to keep the expectations of extending the upside move."

Euro pound rate forecast: Negative below 0.8005

While an early UK rate hike is far from guaranteed, recent hawkish BoE comments and solid UK data have given the market a green light to price in a hike near the turn of the year.

The pound is likely to continue advancing against the euro as a result, particularly when we note that the ECB is moving in the opposite direction and cutting interest rates.

The technical outlook for the euro pound rate remains negative below 0.8005 with the risk-limit above 0.8080.

According to an analysis released by ICN Financial:

"Yesterday's closing stabilised below 0.8005 keeping the downside move valid intraday, while our main awaited targets starts by testing 0.7925, and breaking this level extends bearishness towards 0.7755.

"The current positivity of momentum indicators explains the latest sideways volatility, as breaching 0.8005 and stabilising above it halts the suggested bearish scenario and pushes the pair to recover targeting 0.8160."

Euro dollar rate forecasts: Key support stands at 1.3503

Luc Luyet at Swissquote Research tell us the euro dollar exchange rate confirms that while the near-term outlook is somewhat constructive the broader picture is decidedly more bearish:

"EUR/USD has broken the hourly resistance at 1.3602 (10/06/2014 high). A short-term rise towards the resistance at 1.3677 (see also the 38.2% retracement) is favoured as long as the hourly support at 1.3584 (19/06/2014 low) holds.

"A key support stands at 1.3503. An hourly resistance now lies at 1.3644 (19/06/2014 high).

"In the longer term, the break of the long-term rising wedge (see also the support at 1.3673) indicates a clear deterioration of the technical
structure. The long-term downside risk implied by the double-top formation is 1.3379. Key supports can be found at 1.3477 (03/02/2014 low) and 1.3296 (07/11/2013 low)."