Euro Sterling: GBP/EUR exchange rate forecasted to seek out 1.22 level

The British pound enjoyed a hefty rally against the euro over the course of the past 24 hours thanks to a shock change to monetary policy in the Eurozone.

On Friday morning we see the pound to euro exchange rate is at the 1.20 level. The euro sterling exchange rate is thus at 0.8333.

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Pound euro exchange rate has failed at these levels before

As the below graph shows, the pound euro rate was at these levels at the start of October; but a fresh bout of Euro strength quickly put paid to the level being maintained:

Will this time be different? One analyst points out that there is indeed space for the GBP/EUR pairing to run.

Forecasting a higher GBP to EUR rate

As expected, yesterday saw the Bank of England of England leave monetary policy unchanged.

No details were provided in the monetary policy statement but steady policy was enough for investors to bid up the currency suggests Kathy Lien at BK Asset Mangement.

Lien is forecasting further gains for the GBP/EUR:

"Improvements in U.K. data leaves the BoE comfortable with the existing level of stimulus and while that may not be positive for the GBP/USD because the Federal Reserve is gearing up to reduce stimulus, it is certainly positive for GBP/EUR, after today's surprise 25bp rate cut from the ECB.

"With the currency pair trading at a 9 month low, there is no major support in EUR/GBP until 82 cents (GBP/EUR at 1.22)."

There is however some data on tap at 09:30 this morning which could provide interest to GBP traders.

The UK's visible trade balance is scheduled for release and a narrower deficit is expected after the jump in industrial production in the month of September.

Good data would compound gains for sterling against the euro and U.S. dollar.