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Pound to Euro | Pound Euro Exchange Rate News and Insights
Exchange rate forecasts for the Euro: "60 years of integration are competing against 800 years of history"
- Details
- Category: Pound to Euro
- Published on Thursday, 02 August 2012 11:15
- Written by Sam Coventry
TD Securities see a weak EUR outlook, but Westpac stand out as being rather bullish.
Interesting times in the FX marketplace as global central banks show a clear desire to pick up the pace with regards to monetary intervention.
This action has caused a degree of head scratching at the leading investment bank and research houses.
That said, here we look at two views on the outlook for the euro as we move through August.
TD Securities have advised that they remain bearish on the EUR, a pretty stock viewpoint when we consider the incredibly tough position facing the Eurozone.
Westpac Institutional Bank are however surprisingly bullish on the single currency - more on that further down this page.
Back to TD Securities. In their latest Rates and Foreign Exchange Research note analysts at the Canadian bank forecast "EUR will remain soft against its G-10 FX
peers amid slow growth, low interest rates and the prospect of more ECB balance sheet expansion."
"Europe remains stuck. The view that the problems are intractable has an intrinsic logic. After all, 60 years of integration are competing against 800 years of history. In this case no amount of central bank action will change an ugly end-game. Ultimately, however, it requires a leap of faith. We continue to believe the incentive structure remains to preserve the monetary union, at least among its core constituencies," says Eric Green at TD Securities.
The next several months will prove bumpy and volatile and TD Securities join a host of research institutions that do not expect decisive action from either the Fed or the ECB until September. (This written prior to the August decision).
"The problem for Draghi is that monetary policy cannot address the balance of payment crisis which lies at the heart of the crisis. More concrete steps toward political union are the only hope to make Europe function as a monetary union. Without it, Draghi has nothing to save," says Green.
This translates into a weaker Euro on the currency markets:
"It seems likely that yield and growth considerations for the likes of the AUD and NZD (as well as the CAD) combined with the development of the EUR as a “funding currency” will maintain pressure on the likes of EUR/AUD and EUR/CAD, which have fallen to euro-lifetime lows. In the “race to the bottom” in G-10 FX, no-one seems likely to beat the EUR at the moment," says Green.
In September Euro dollar is forecasted at 1.22, this falls to 1.18 in December the rate remains here through March and picks up to 1.2 in June 2013.
Over at Westpac Institutional bank the outlook for the euro is more hearty.
Analysts believe a pro-risk environment will emerge, and this will support the single currency. A note to clients from the bank says:
"There are deep and meaningful developments afoot at the ECB in our view and just as markets were wrong to fade risk in Dec 11/ Jan 12, they may be wrong again. When markets sell risk post the ECB we will be looking for opportunities to buy EUR crosses."
