Pound euro exchange rate outlook: GBP/EUR forecasted to retake 1.2 level, Italian politics could destabilise EUR

The euro to pound exchange rate is thus at 0.8359.

Can the pound sterling be propelled towards 1.2 today?

Sterling is looking to retake the level of 1.2 against the euro today.

The last time we saw the exchange rate at this level was on the 18th of January when sterling was on a one way ticket lower towards 1.14.

Geoffrey Yu at UBS forecasts the pound to retake 1.2 and extend gains even further:

"With the trending and momentum tools pointing lower, the risk is for more
downside. Support is at 0.8285 ahead of 0.8160. Resistance is at 0.8471."

Turning the equation around (GBP/EUR): Resistance is at 1.207 ahead of 1.225, support at 1.18.

UK data is mixed, sterling fails to react

On the domestic data front money supply data has formed the main focus of the morning.

More money has been made available to the housing sector it has been shown.

The Mortgage Approvals released by the Bank of England came in at 62.226K, well above forecasts for 61.350K.

However, UK Net Lending to Individuals has actually fallen. Monthly lending figures show 1BN GBP of fresh credit was made last month, analysts had forecast 1.6BN.

Elsewhere, M4 Money supply came in at an expected +0.7%.

In all, the news has proven to be sterling neutral.

The euro: Inflation data ahead, politics dominate

At the top of the hour the euro will face inflation data.

Consumer Price Index - Core (YoY) (Sep) is predicted to come in at 1.1%, unchanged on last month.

On the political front the situation in Italy has the potential to destabilise the outlook.

"While things have been calm(er), Italy risks being the source of latest fireworks with Prime Minister Letta confirming he is seeking a vote of confidence after Berlusconi (who may be ejected from Senate due to tax-fraud) ordered (yes, he’s still running the show) the withdrawal of 5 cabinet members from his party’s wing within the young coalition and emphasised its fragility. VAT is the issue within next year’s budget," says Mike van Dulken at Accendo Markets.