Sterling will be under pressure until later this year say CaxtonFX

The pound to euro exchange rate is 0.21 pct down on Friday night's close at 1.1746.

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The euro is actually rather week - right across the currency market place today, a fresh bout of selling was sparked after the release of the Eurozone Sentix Investor Confidence index which rose to -11.6 in June, from -15.6 in May, according to data released by the Sentix GmbH.

Analysts expected slightly more increase to -10. Also weighing on the euro (but not GBP-EUR !!) is news that Italy Q1 GDP has been revised down to -0.6% Q/Q, -2.4% Y/Y vs prelim -0.5% Q/Q, -2.3% Y/Y.

The gains against sterling are thus a function of a broader-based GBP weakness; we suspect this is a technical correction that has been triggered in the wake of last week's broad-based currency strength.

Richard Driver says gains for the pound to euro exchange rate pairing could only be realised later in the year:

"It is proving very difficult indeed for the market to budge this pair very far from the €1.1765 (85p) area. We continue to think the market is overly-suspicious of a Carney-related BoE shake-up (pro-QE), so perhaps sterling will be offered a delayed boost later this summer."

For the euro pound exchange rate we note the euro has benefited from a bounce of support:

"Prices are retesting support-turned-resistance at 0.8494, with a break higher on a daily closing basis eyeing the April 16 close at 0.8575. Alternatively, renewed selling pressure eyes a confluence of trend lien support at 0.8450," says Ilya Spivak at FXCM.

However, analysts at Trading Central say they are predicting further declines in the euro pound exchange rate owing to the power of recent sterling momentum.

In their latest note on the EUR-GBP Trading Central say:

"Short positions below 0.852 with targets at 0.8475 & 0.845 in extension. The pair stands below its resistance and remains under pressure, the RSI lacks upward momentum."

However, should the euro pick up more steam against the shared currency and break above 0.852 then investors are urged to look for further upside with 0.854 and 0.856 as targets.