The latest exchange rate forecasts for the Euro to Dollar (EUR USD) and British Pound to Swiss Franc (GBP CHF) conversion rates.
EUR USD - Euro to Dollar Exchange Rate Forecast
For many analysts, the Euro to Dollar exchange rate pairing is the most keenly watched of all the major currency pairs as it is the most actively traded currency pair in volume terms given that the top three exporters in the world are the USA, China and Germany in that order.
The euro traded at a 14 month low against the US Dollar in yesterday’s foreign exchange markets after the euro weakened on the back of some ‘dovish’ comments from European Central Bank (ECB) President Mario Draghi ahead of next Thursday’s policy statement for October from the ECB.
In a speech yesterday, Draghi said that the ECB will keep its monetary policy "accommodative" for as long as needed and use every tool at its disposal to fight deflation. Analysts took that to mean that the ECB, despite strong, persistent and long running German opposition is slowly moving towards the idea of some form of quantitative easing (QE) program in order to reflate the moribund euro zone economy.
Draghi said "Monetary policy will remain accommodating for a long time and I can tell you that the Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under 2%. Interest rates will remain low because they can’t get much lower.”
Only earlier this month, the ECB surprised the currency markets by cutting euro zone interest rates to record lows in a bid to avert the threat of deflation that is stalking the euro but, if anything, the data out of the euro zone in the last month has worsened.
In addition, on Wednesday in Germany, by far the biggest and most powerful euro zone economy, the respected Ifo Institute published their latest business confidence index which showed a strong deterioration for the fifth month in a row to a low level not seen since April 2013.
The data added to fears that the economic recovery in the euro zone’s largest economy is losing momentum. With the second largest euro zone economy, France barely out of recession and Italy, the third biggest economy back in recession the outlook for the euro zone can only be described as grim and a growing number of analysts now expect the ECB to continue to loosen monetary policy in response.
By contrast, the US economic recovery continues to gather pace after the latest economic data revealed that new U.S. homes sales soared last month. The US Census Bureau reported earlier that U.S. new home sales data rose by 18% last month to 504,000 units and new home sales for July were revised up to a 1.9% increase from a previously estimated 2.4% drop.
Only yesterday, data showed that the U.S. manufacturing sector expanded in September in line with market expectations. Analysts are now speculating that it is only a matter of time before the Federal Reserve starts to increase US interest rates and that the first rate increase may come sooner than expected.
The majority of analysts now expect the downward trend for the Euro against the US Dollar to continue for some time.
GBP CHF - British Pound to Swiss Franc Exchange Rate Forecast
In keeping with the trend against all of the most actively traded currencies in the market, the pound has risen every day this week in value against the Swiss Franc (CHF) and traded in yesterday’s foreign exchange market at its highest level since February 2011.
The relief rally from the result of the Scottish independence referendum poll has been sustained by comments from Bank of England (BoE) Governor Mark Carney yesterday that the BoE is getting nearer to raising UK interest rates but warned that the exact date will depend on ongoing economic data.
Carney also said that the UK’s economic outlook was much improved and a rate rise was only a matter of time. Carney said “The point at which interest rates ... begin to normalise is getting closer. In recent months the judgement about precisely when to raise Bank Rate has become more balanced. While there is always uncertainty about the future, you can expect interest rates to begin to increase."
Of interest, the Pound has fared well right across the trading board against all of the other major currencies of the world this week but the so far sustained rise in the value of the pound has been partially explained against most of the other currencies by local problems negatively affecting the local currency. For example, the fall in oil and other commodity prices have hurt the so-called commodity currencies like the Canadian, Australian and New Zealand dollars. This does not follow with the Swiss Franc as Switzerland is one of the richest countries in the world and the Swiss economy is noted for its stability and prosperity and the Swiss Franc is seen by analysts as one of the ultimate ‘safe haven’ currencies in the currency market. With an increase in turmoil, especially in the Middle East with ongoing conflict in Iraq, Syria, the Gaza strip, Libya and the Ukraine it has come as a surprise that the safe haven renown Swiss franc has not enjoyed more support.
Analysts are therefore divided on how long this sterling rally will last and opinion is divided as to when a correction will be priced in.