Dollar Surges, Pound and Euro Forecast to Struggle in Longer-Term

A roundup of the latest foreign exchange forecasts, news and insights covering the pound sterling (GBP), the euro and US Dollar.

It is all about the surging US dollar at the present time. The USD is powering ahead following the release of better-than-expected US non-farm payroll data. The headline non-farm payroll came in at 248K, markets were only expecting 215K. The US Dollar has predictably rallied on the news:

Rates for Reference At the Weekend:

• The pound to dollar exchange rate is: 1 GBP = 1.5975, the conversion rate fell 0.98 pct lower.
• The pound to euro exchange rate is: 1 GBP = 1.2770, the conversion rose 0.20 pct higher yesterday.
• The euro to pound is therefore converting at 0.7837.
• The euro to dollar exchange rate is: 1 EUR = 1.25163, the conversion fell 1.15 pct lower yesterday.

(If you are holding out for a better rate DON'T DELAY. Ensure your independent FX provider has the correct buy order for when your rate is hit and the correct stop-loss order incase the market moves further against you. Find out more here. Doing so can secure up to 5% more currency).

Dennis de Jong, managing director at UFX.com, comments on better than expected US nonfarm payrolls figures:

“After a disappointing August, this month’s results have shown that investors were certainly right to be optimistic ahead of today’s announcement.

“September’s figures are more than encouraging and, with the labour market recovering and momentum building, expectations of an interest rate hike will grow.”

These growing expectations are likely to keep the USD well supported going forward.

USD Gets Over Recent Soft Patch

The key driver of foreign currency markets at the present time is the strengthening USD.

However, we have seen some weakness start to set in.

Piet Lammens at KBC Markets notes:

"Of late, the dollar had an overall green light and cleared several important resistance levels. The sky was the limit. Yesterday, the unidirectional USD positioning finally took its toll. A global risk-off sentiment and a weaker than expected US manufacturing ISM provided ammunition for a USD correction.

"The risk-off modus and the decline in core bond yields provides the perfect excuse for a correction on the dollar across the board."

As the following forex forecasts show - any USD weakness should be considered temporary. While it may do damage to those approaching the currency markets with a short timeframe, the bigger picture is certainly pro-USD.

Pound to Dollar Exchange Rate Forecast: Time for Consolidation?

While the sell-off appears to have come to an end for now, we would not necessarily expect the GBP/USD to rally back to 2014 highs.

Analyst Luc Luyet at Swissquote Research tells us:

"In the longer term, the collapse in prices after having reached 4-year highs has created a strong resistance at 1.7192, which is unlikely to be broken in the coming months. We favour a medium-term consolidation phase with supports at 1.6052 and 1.5855 (12/11/2013 low) and a resistance at 1.6644."

Euro to Dollar Exchange Rate Forecast: Targeting 1.2

We have reported that in the long-term the euro dollar rate could end up hitting 1.18. The nearer term picture does have some key levels to work through though.

The technical picture of EUR/USD deteriorated further after the break below the key 1.2662 support level (Nov 2012 low).

Lammens says: A confirmation is still needed as the pair is again near that area this morning. Over the previous days, we indicated that we are a bit surprised by the fast pace of the EUR/USD decline.  The trend is not really questioned. Even so, it might take time for the pair to work through oversold conditions. The 1.2043/1.1877 support is the LT target."

Euro to Pound Exchange Rate: Declines Now Over? 

Turning to the euro pound rate (EUR/GBP) we see the pair hovering above the 0.77 big figure; indeed the key 0.7755 support stays intact for now.

While 2014 has been a good year for the British pound, Lammens strikes a bearish tone on the GBP going forward:

"Short-term, we might see a slowdown in the EUR/GBP decline as the 0.7755 support looms. Further down the road, the focus for sterling trading should return to the economic fundamentals and to the guidance from the BoE on policy normalisation. After the recent rebound of sterling and the soft comments from the BoE minutes, investors are pondering the chances for further sterling gains."