GBP/EUR: Outlook Points to Further GBP/EUR Exchange Rate Gains
- Written by: Gary Howes
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The outlook for the pound euro exchange rate is cloudy in the short-term, however analysts continue to see the GBP outperforming the EUR in the longer term.
We predict the GBP/EUR will undergo a touch of volatility on Friday morning, our coverage of the release of this month's retail sales can be found here. However, all indications continue to point to further GBP/EUR gains. UBS tell us that the recent sharp decline was staged after testing critical resistance at 1.2254. A close above which would be next bullish event, triggering buying to 1.2373. Resistance should hold at 1.2082.
The euro is witnessing all-round pressure today with the headline EUR/USD slips off yesterday’s seven-week high after a mixed reading of euro zone PMI surveys dented some of the single currency’s recent appeal.
The pound to euro exchange rate (GBP to EUR) is trading slightly higher than seen at Wednesday night's close. We quote the pair at 1.2158 in early afternoon in London.
A set of below expected PMI numbers from the euro area have driven the rate lower and with some sterling buyers in the wings UK data later in the morning could support the pounds recovery
"French inflation data has also offered the pound a helping hand, but we expect sterling will keep levels above 1.21 during trading today" says Sasha Nugent at Caxton FX.
Euro pound exchange rate outlook
Technical analysts tend to forecast the pound euro exchange rate from the perspective of EUR/GBP. Therefore, divide 1 by the below numbers to form the GBP/EUR perspective.
Piet Lammens at KBC Markets says he remains bullish on sterling in the long-run, however the possibility of short-term declines exists. He notes:
"The UK currency is looking for a new equilibrium in the ‘forward guidance bis’ era. High profile good news is probably needed to inspired further sterling gains.
"Global factors might affect sterling trading, too. Sentiment might turn a bit more risk-off after the poor PMI in China. Of late, the euro was very resilient in a risk-off context. If the EMU PMI’s are reasonably good, EUR/USD might also (slightly) outperform cable today. So, we maintain a LT sterling positive bias, but in the day-to-day perspective, the sterling correction might have some further to go. We remain also a bit cautious on sterling ahead of tomorrow’s retail sales as we think that a rather poor figure is possible.
"The key 0.8168/60 support was challenged early this week. A break below this level would be a negative for the euro and a further positive for sterling. The jury is still out. Even as we have a sterling positive bias longer term, we stay a bit cautious short-term as the UK data might be slightly weaker than in the recent past. We keep a sell-on up-ticks bias."
In their assessment of EUR/GBP, MIG Bank say:
"EUR/GBP is bouncing near the support at 0.8160 (see below). However, the resistance at 0.8254 (50% retracement) has held thus far. Hourly supports lie at 0.8217 (intraday low) and 0.8191 (18/02/2014 low). Another resistance stands at 0.8280 (06/02/2014 low).
"In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high). Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."
