Pound euro exchange rate forecasted at 1.24 by TD Securities
The pound to euro exchange rate was once against rejected at the 1.2 level at the close of last week following a strong recovery back to this level through the course of the week.
We saw this level rejected at the start of October, and those holding out for a better pound euro exchange rate will be wondering whether we will see a successful break higher this time around?
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Forecasting the pound to euro at 1.24
According to analyst Shaun Osborne at TD Securities we could indeed see a decided shift higher for this forex pair in coming months. This is just the latest in a number of forecasts that have been recently released favouring strong gains in the GBP/EUR rate.
In a weekly forecast note to clients Osborne says:
"The September/October correction in EUR/GBP extended higher than we expected (briefly above 0.85 resistance and the 200-day MA) but the rally took the form of a bear wedge pattern and the sell off (bearish outside week) and break below the base of the consolidation last week generated good follow-through selling interest this week.
"The market has steadied in the low 0.83 (1.2) area, raising the risk of a minor correction but the bear wedge breakdown targets a drop to 0.8050 (GBP/EUR @ 1.24) over the next 2-3 months and we think modest rallies to the 0.84 area might provide an opportunity to establish short positions. Look to sell EUR rallies."
Euro weakens, US dollar strengthens
Keep an eye on the headline euro dollar exchange rate - this will be important for the GBP/EUR as we will likely need a decided EUR sell-off before GBP/EUR makes a crack at 1.24.
The euro continues its slump against the greenback following the unexpected move made by the European Central Bank to lower its benchmark interest rate to 0.25%.
A fall in inflation to the weakest pace in 4 years was at odds with the central bank mandate of price stability and was seen as the main reason for the rate cut. Consequently, the EUR/USD dropped another 58 pips to reach 1.3358.
Meanwhile, the USD was boosted by Friday’s nonfarm payrolls data which indicated a rise of 204,000 jobs in October compared with estimates of a 120,000 increase amid upward revisions for the previous two months by 60,000 jobs.
However, the consensus seems to point to a delay in scaling back the monetary stimulus until March next year from $85 billion currently to $70 billion. Meanwhile the Dow Jones rallied 150 points to 15,748.