Euro to Pound Sterling Exchange Rate Recovers; EUR/GBP Seen 0.5% Higher
- Written by: Gary Howes
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The euro sterling exchange rate has headed higher on Thursday morning, a strong response to yesterday's hefty declines.
The euro to pound sterling exchange rate slumped on Wednesday as the British pound proved to be a star performer thanks to a rapidly improving UK employment market.
However, the euro has made a comeback today; at 11:00 in London we see the euro sterling rate trading 0.5% higher at 0.8215.
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Euro exchange rates rally as Eurozone data improves
Driving the euro higher against the British pound today is a set of good data releases out of the Eurozone.
The flash PMI readings from both Germany and France showed an improvement with the exception of slight miss of German PMI services report. France which has been a horrid laggard and a drag on Eurozone growth finally saw an uptick in activity.
"Although both PMI remained below the key 50 reading, French Manufacturing PMI rose to 48.8 from 47.6 the month prior while Services increased to 48.6 from 48.2. Sentiment may have improved after President Hollande changed his rhetoric this month to assume a more business friendly posture," says Boris Schlossberg at BK Asset Management.
Meanwhile in Germany private business conditions rose to a 31 month high as PMI Manufacturing hit 56.3 versus 54.7 eyed while services registered a reading of 53.6.
"The strong man of Europe continues to massively outperform the rest of the region and is carrying the EUR/USD on it shoulders as the pair rose to within a few points of the key 1.3650 level in response to the positive data," notes Schlossberg.
The euro pound sterling over the past 24 hours
Sterling shot to three-week and one-year highs against peers from the U.S. and euro zone, respectively, as area unemployment moved several steps lower and landed on the doorstep for the nation’s central bank to consider raising interest rates from record lows.
The pound is now close to the 2011 highs it hit against the dollar earlier this month.
Britain’s jobless rate fell to 7.1% in the three months to November, the lowest in nearly five years, from 7.4%. Forecasts had called for unemployment to fall a notch to 7.3%. Back in August, when unemployment was closer to 8%, the Bank of England (BoE) said it wouldn’t consider a rate increase until the jobless rate improved to 7%.
Minutes from the BoE’s previous meeting also came due today and stressed that rates wouldn’t automatically rise once unemployment hit its 7% threshold. Upside scope for the pound appears greater with area fundamentals and rate hike expectations both working in its favor.
Latest forecasts for the euro to sterling exchange rate
The euro is one currency that has rejected the pound sterling over the past few hours.
Sean Lee at FXWW notes there is a chance traders would look to book profits on this pair:
"Sitting on base of recent bearish trend channel. This suggests that the market is somewhat oversold (but that bear trend remains in play); I would not recommend going long against this trend until a daily low forms at channel lows, existing shorts can certainly consider booking some profits near current levels at 0.8170."
However, the forecasts continue to favour the British pound as noted by Danske Bank.
Piet Lammens at KBC Markets tells us:
"Yesterday’s break below 0.8225 deteriorates the technical picture of EUR/GBP further. In case of a risk-off correction, we expect cable to outperform EUR/USD, keeping EUR/GBP under pressure. So, we continue to see upticks as an opportunity to sell."
And Luc Luyet at MIG Bank is also bearish on the euro sterling exchange rate:
EUR/GBP has broken the support at 0.8225. Supports can be found at 0.8160 (61.8% retracement) and 0.8082. The short-term technical configuration is negative as long as prices remain below the hourly resistance at 0.8264 (20/01/2014 high). Another resistance lies at 0.8286 (15/01/2014 low).
"In the longer term, the technical structure remains negative as long as price remain below the resistance at 0.8350 (13/01/2014 high).
Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."
The question for us at Pound Sterling Live is how far the correction higher in EUR/GBP lasts. We join a number of analysts out there who see such moves as opening up the potential to establish fresh short positions on the shared currency.
