British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency forecasted to advance vs EUR further, EURGBP target revised at UBS

• 

Details

Category: British Pound Sterling

Published on Tuesday, 17 January 2012 10:34

Written by Will Peters

Forecast for the euro pound exchange rate lowered, UK gilt demand will be key to sterling strength.

---

British Pound Sterling (GBP) in Euro (EUR): GBPEUR is 0.6% lower at 1.2027.

British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is 0.43% higher at 1.538.

British Pound Sterling (GBP) in Australian Dollar (AUD): GBPAUD is 0.83% lower at 1.4736.

The main theme on the currency markets today is that of positivity - a rebound in equities is under way following a good Chinese GDP data release.

---

Advertisement - Article Continues Below

---

This has sent the US dollar lower, and the euro higher.

Looking at the domestic scene, UK CPI is out on Friday.

"The market is looking for a 4.2% headline print (UBSe. 4.1%) but we doubt this will affect the BoE’s broader outlook, as the likelihood of QE extension remains high in the coming months," says an exchange rate note from UBS.

UBS say that, given that the UK’s ratings status remains solid compared to most of the Eurozone, and the Gilt market continues to provide the necessary liquidity, they continue to see EURGBP trading lower and move their 3m target to 0.80, in line with our year-end forecasts.

Today’s session brings the monthly UK inflation update, which is expected to show a sharp easing in price pressures. Whilst consumers will be relieved, this won’t be particularly positive for sterling.

The currency markets were relatively calm yesterday, despite Standard & Poor’s downgrade to the European Financial Stability Fund by one notch.

Focus was directed at last night’s Chinese GDP figure, which turned out to be positive and gave market confidence a much-needed kick.