British Pound Forecasts: Sterling to Euro, Sterling to US Dollar Outlook and News

The pond sterling (GBP) exchange rate complex is forecast to retain a positive bid against the euro and US dollar as the European Central Bank threatens to act on a strong currency.

In the wake of comments made by the European Central Bank's Mario Draghi we see:

• The pound euro exchange rate is 0.02 pct higher at 1.2238.
• The pound dollar exchange rate is 0.01 pct lower at 1.6932.
• The euro dollar exchange rate is 0.03 pct lower having attained level of 1.3836.

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Thursday's big event was the interest rate and policy decision at the European Central Bank which was unchanged for the month of May.

However, in a the following press conference ECB President Draghi rattled some cages when he effectively said markets should expect some EUR-negative stimulatory measures to be announced at the next meeting.

Draghi said officials would like to see the bank’s new forecasts before acting and that they are “comfortable with acting next time”.

His comment suggest a higher risk of easing at the ECB’s June meeting and have sent the euro tumbling from a 2-month high in choppy trade.

However, the ECB has a reputation for talking and not following up with action. Will it be so this time around?

Euro pound exchange rate forecast

Paul Robson, FX Strategist at Royal Bank of Scotland gives his forecast for the euro pound exchange rate following today's unchanged Bank of England policy decision:

"The cross managed to keep the trade above the 0.8200 handle after briefly dipping to the round figure post-Asian session on Thursday, bolstered by the upbeat sentiment around the EUR. In the data front, the BoE left both the refi rate (0.5%) and the Asset Purchase Programme (£375 billion) unchanged in today’s meeting, broadly in line with market expectations. Next on tap and more relevant will be the ECB monetary decision followed by the key press conference by President M.Draghi.

"Price is contained between main 0.8160 support area and 0.8410 resistance. Being nearer the support than resistance, the risk at this stage sits with a test of the support, which if broken could open the way to 0.8000. Risk eases if we see price get back above 0.8284 on a weekly close."

Pound sterling to US dollar forecast

Karen Jones at Commerzbank tells us the exchange rate has stalled:

"GBP/USD has currently stalled at 1.70 but we would allow for a challenge of 1.7041, the August 2009 peak.

"Currently everything points to this being the longer term end of the move, but given that the market has not broken any significant support, we will need a close below the uptrend at 1.6873 to confirm that the market has topped.

"We note the 13 count on the weekly chart and TD resistance at 1.7015. We would also mention that we have a TD perfected set up on the monthly chart – we have not seen one of these since May 2010. All are warning signs of the end of the move."

Current trade: Short 1.6904 Recommended Trade: add 1.7000, stop 1.7050.Exit 1.6700

Euro dollar exchange rate forecast

Karen Jones at Commerzbank has the following forecast for the euro dollar:

"EUR/USD’s set back has been tepid and it is poised to challenge the 1.3967 March high. Currently we remain unable to rule out an extension to the two resistance lines at 1.4012 and 1.4023 (on weekly chart – these connect the highs from 2012), and, if seen, we look for these latter levels to hold the topside and provoke failure.

"We view the longer term pattern as a potential bearish wedge. We note the 13 count on the weekly chart and the TD resistances at 1.4015 and 1.4100 and continue to look for failure in this vicinity.

"Current position: Square Recommended trade: Attempt shots 1.3955, add 1.4010, stop 1.4100."

Barclays revamp welcomed by markets

Turning to the markets on Thursday, we note a positive tone is being maintained.

A great degree of the strength being seen in the FTSE rests with Barclays.

Ishaq Siddiqi at ETX Capital tells us:

"Barclays shares are currently rallying after CEO Anthony Jenkins confirmed a radical strategic move to turn the banking giant into a leaner and meaner machine. Barclays will cut a further 7k jobs from its investment banking operation and create a £400bn “bad bank” as part of a strategic revamp.

"This is being welcomed by the market and shareholders alike as it’s the first serious attempt by Barclays to evolve, after years of failing to de-leverage appropriately – in the latest shake-up, Barclays is looking to downsize is its trading operations and boosting profitability in the remaining core businesses.

"So in this latest revamp, Barclays will nearly halve its investment banking business, which is driving much of the cheer. The investment bank, which has been embroiled in scandal, also suffered deep losses on the back of poor performing fixed income commodity and currencies division."