GBP/EUR Rate Week Ahead Forecast: 1.17 Back In The Crosshairs

• GBPEUR technical setup constructive
• But the extent of gains will remain limited
• Strong support evident at 1.14 multi-week
• Watch Bank of England's Bailey on Tuesday
• Friday sees UK GDP released

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The Pound to Euro exchange rate made a solid start to 2024, having posted a 0.75% advance in the first week of the new year.

The gains take the exchange rate above 1.16 and underscore a broadly supportive setup that could result in a gradual move towards the top of the 2023 range near 1.17 over the coming days.

GBPEUR trades above both the 100-day and 200-day moving averages, indicating supportive near-term momentum that can offer a retest of 1.17 first and then the 2023 high at 1.1772.

But those looking to make payments from pounds into euros should be aware that the bigger picture remains one of an exchange rate that is trending sideways, and significant upside potential is likely limited.

Furthermore, forays above 1.17 are viewed as likely being brief, requiring a deft hand when transacting and a need to maintain modest expectations.

Only a break above 1.1750 on a weekly basis would pique our interest and hint that the long-running, multi-month sideways range is about to break.

To the downside, the pair looks well supported at 1.14 and only a significant deterioration in the UK economic data pulse would likely deliver lower levels. For now, we don't see this as likely, given the relatively robust nature of survey data.

Above: 1.17 looks achievable in the near term, but confidence in any sustained residency above this level is low. Track GBP with your custom rate alerts. Set Up Here.

The coming week is relatively quiet from a UK data perspective, with the release of GDP numbers on Friday forming the data highlight, but it could well be a speech from the Bank of England's Andrew Bailey on Tuesday that moves the currency market.

Governor Bailey will appear before the Treasury Select Hearing on the December Financial Stability Report at 2.15 pm GMT.

The financial stability report is not directly linked to monetary policy, but there is a chance Bailey will be asked questions regarding interest rates, which can offer some clues as to whether the Governor maintains his steadfast view that it is too soon to consider cutting interest rates.

Turning to the GDP release, the market is poised for a reading of 0.2% month-on-month in November, while the year-on-year rate is expected at 0.1%.

The rolling three-month figure is expected to read at -0.1%.

Should the data beat expectations, the Pound can move higher, but disappointments could send GBP lower across the board.

There are no major releases to watch from the Eurozone this week.