Where Next? LATEST Forecasts for the British Pound, Dollar and Euro Exchange Rates

The pound to euro exchange rate has moved lower as a result as have other major GBP pairs, but there are some positives to account for in our latest forecasts.

The pound to dollar rate is however surprisingly steady but the outlook still favours the USD which is enjoying a summer of strength. However, sterling is a notoriously tricky customer at present and difficult to predict.

We also note the euro dollar to be under sustained pressure and would expect further falls in the near term. For reference the following levels are quoted at the time of publication:

• The pound euro exchange rate (GBP/EUR): 0.31 pct up @ 1.2524.
• The pound dollar exchange rate (GBP/USD): 0.07 down @ 1.6568.
• The euro dollar exchange rate (EUR/USD): 0.37 pct down @ 1.3231.

If you are holding out for better exchange rates then don't hesistate, ensure your FX provider has the relevant buy order in place for when your rate is achieved. Likewise, if there is a threshold you are not willing to cross to the downside ensure stop-loss orders are in place. Please learn more here.

Forecasts for GBP: Bank Edges Towards Rate Rise

The longer-term uptrend in the pound sterling complex remains a valid indicator as to where the currency is headed.

This is particularly true against the euro which does not have the benefit of a growing Eurozone economy to keep its valuations underpinned.

However, the near-term is problematic - sterling notched a new early April low as weaker than expected U.K. consumer spending offered more evidence of how the British economy has come off a boil. Retail sales rose by a mere 0.1 percent (m/m) in July, just a quarter of forecasts of a 0.4 percent (m/m) gain. Meanwhile, the 2.6 percent rise in the annual number was the slowest since November.

"Sterling has rapidly fallen out of favor this summer as more and more hop off the early rate hike bandwagon," says Joe Manimbo at Western Union.

We see signs that the the Bank of England is to raise rates, as early as Novemeber in the estimations of some analysts, as being supportive of the pound exchange rate complex longer-term.  

News that two decision makers at the Bank of England have voted to raise interest rates has prompted fresh buying of the GBP.

Tony Wilson, head of strategy at the foreign exchange specialists FEXCO, does however question whether the positive impact will be a lasting one:

"After three years of uninterrupted unanimity, the first split has appeared among the Bank of England's rate-setting grandees.

"All things being equal, such a strong hint that an interest rate rise is approaching should send the Pound surging. But Sterling's immediate gains were quickly pared back, as the markets have yet to shake off the hangover left by Tuesday's surprisingly large drop in inflation.

"With CPI comfortably below its 2% target and wage growth still weak, the Bank has no pressing need to use interest rates to tame inflation. As a result the MPC's two dissenting hawks are likely to remain voices in the wilderness.

Technically, the sterling dollar rate is struggling

"GBP/USD has broken the key support at 1.6693. The short-term technical structure is negative as long as prices remain below the resistance at 1.6757. Another resistance lies at 1.6844," says Luc Luyet at Swissquote Research.

In the longer term Luyet Points out that the break of the key support at 1.6693 invalidates the positive outlook caused by the previous 4-year highs.

"However, the lack of medium-term bearish reversal pattern and the short-term oversold conditions do not call for an outright bearish view. A key support now stands at 1.6460," says Luyet.

Euro dollar exchange rate forecast: EUR/USD Slips Through Support

The euro dollar rate has meanwhile slipped through the 1.3336/33 support zone, a daily close below which has triggered further losses to the 1.3295 November 2013 low en route to the 1.3105 September low.

Commenting on the technical outlook is Karen Jones at Commerzbank:

"Minor resistance comes in around 1.3333/36 and more important resistance along the three month downtrend line at 1.3437. Only an unexpected daily chart close above the 1.3445 current August high would delay our overall negative outlook for a deeper retracement towards the June low at 1.3503 to take place. While EUR/USD remains below its July peak at 1.3701, our medium term negative bias will remain intact."

Euro to pound sterling exchange rate forecast

The downward trend in the euro to pound rate has stalled and near-term sideways action is favoured.

We do note however that the longer term picture continues to favour sterling over its continental rival.

From a technical perspective Luc Luyet at MIG Bank tells us:

"EUR/GBP is moving sideways near the key resistance at 0.8034. An hourly support area lies between 0.7983 and 0.7979 (50% retracement of the rise from 13 August). Another support stands at 0.7916.

"In the longer term, the break of the key support area between 0.8082 and 0.8065 opens the way for a full retracement of the rise that started at 0.7755.

"Another strong support stands at 0.7694. A break of the resistance at 0.8034 is needed to suggest some exhaustion selling pressures."