GBP/EUR Rate 5-Day Forecast: Increasingly Constructive

• GBPEUR is supported as long as above €1.1490
• €1.16 a tentative target
• Thursday UK GDP is week's data calendar focus
• But watch Bank of England's Pill Thursday
• And Governor Bailey on Friday

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The Pound to Euro exchange rate (GBPEUR) lacks the volatility of USD-linked pairs but recent developments are nevertheless instructive and we see the prospect for further advances over the coming days.

The support level at 1.1490 that we referenced in last Monday's week ahead forecast remains highly relevant; for as long as the market stays above here the prospect of a recovery stays alive.

Evidence shows weakness has consistently petered out in the 1.1490-1.15 region. Given that the fundamental backdrop facing the Eurozone and UK remains similar, this state of affairs could be expected to continue.

As long as 1.15 holds then a slight upside bias can extend over the coming days, albeit with limited potential, €1.16 might be the limit of Sterling's abilities.

Above: GBPEUR at daily intervals showing a formidable support area that remains in touching distance. Exchange rate alerts. Set up a daily rate alert email to track your exchange rate OR set an alert for when your ideal exchange rate is triggered ➡ find out more.

Of course, global events and data could shake things up, although the data calendar is unusually sparse in the Eurozone this week. We will be keeping an eye on some European Central Bank speakers (ECB) who could rouse some interest.

The UK economic calendar comes back to life this week with Thursday's monthly GDP release and a number of other economic data prints.

The headline figure to watch is August's monthly GDP where a 0.2% expansion is expected in what amounts to a sharp recovery from July's weather-impacted -0.5% reading.

Should the number beat expectations it would amount to another positive surprise that could boost the Pound. Recall that data is in the driving seat on global currency markets at present and last week, we saw Sterling put in some decent gains following the upgrade to September's PMI readings.

There is interest elsewhere at 7AM on Thursday when manufacturing production and industrial production numbers are also released.

However, these tend to be overshadowed by the GDP figure, as does the monthly trade balance release.

Watch out for Bank of England Chief Economist Huw Pill, who is due to speak at 10AM on the same day. Pill's last speech in Cape Town proved relevant in setting out the Bank's desire to see UK interest rates stay elevated for an extended period.

More of the same could underpin the Pound's prospects against currencies where interest rate cuts are expected to commence earlier in 2024.

Governor Bailey speaks at 9:00 on Friday and could be expected to repeat the line that he expects inflation to fall notably over coming weeks, although the battle has not been won.

Therefore, he will likely parrot the Bank's official stance that it remains ready to hike interest rates again. On balance, this should support market expectations for a potential rate hike before the year is done, which would support Sterling.