Pound euro exchange rate: GPB/EUR moves back above 1.21, GBP predicted to struggle to hit better levels

"Good selling opportunities for those betting on the short side of the play." - Swissquote Bank on the EUR to GBP rate.

The pound to euro exchange rate is seen trading 0.21 pct higher than at last night's closing level; GBP/EUR is quoted at 1.2118.

The euro pound exchange rate (EUR/GBP) is thus at 0.8264.

"EUR/GBP spiked to 0.82865 (50-dma) on supportive IFO. Trend and momentum indicators turn upwards, the MACD (12- 26 day) is now positive calling for more gains in the short-run as long as the 21-dma (currently at 0.82525) holds. Good selling opportunities for those betting on the short side of the play," says a Monday note on the euro to pound rate from Ipek Ozkardeskaya, Swissquote Research.

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The single currency ended the week in a much better position and even managed to drive the rate below 1.21 over the weekend.

Today we are seeing robust strength in the euro exchange rate complex, but the pound sterling has successfully held ground.

"The pound is still battling with a firmer euro this morning but the rebound shows there are still some willing to put their money in sterling. German Ifo data has kept the pressure on," says Sasha Nugent at Caxton FX, "it will be a struggle for the pound to encourage higher levels during today’s session and trading has already returned to levels below 1.21. It will be a difficult day ahead for the pound."

Euro exchange rate complex starts new week higher

The euro made a good start to the week amid Moody’s revised up the Spain’s government bond rating to Baa2 with positive outlook on Friday (5 minutes before the NY close).

The better-than-expected IFO survey in Germany sent EURUSD to 1.3771 this morning, a stone’s throw lower than last week high of 1.3773.

Faster-than-expected increase in Euro-zone CPI y/y (+0.8% in Jan vs. 0.7% exp. & last) failed to clear resistance above this level.

"Option bids trail up from 1.3725, offers are still seen pre-1.3775, stops are building above. EUR-techs remain comfortably in the bullish zone, yet the event risk intensifies. As mentioned before, the ECB officials continue talking about weakness in Euro-zone’s consumer prices and ECB’s determination to act against," say Swissquote.

The possibility of an ECB rate action in March 6th meeting inevitably keep the EUR-bulls balanced.

"At the current levels, we expect traders to continue selling the rallies into the March 6th meeting," say Swissquote.

A busy week for the euro lies ahead

There is little by way of interest for the pound sterling exchange rate complex, however, this week promises to offer some action for the EUR.

This past week we learned that manufacturing and service sector activity slowed while investor confidence weakened.  

Germany's IFO report, unemployment rate, retail sales and final Q4 GDP numbers are due for release along with consumer prices and confidence from the Eurozone.

For the most part, we expect mixed releases that will show the Eurozone recovery on shaky ground.  

EUR/USD is trading firmly above 1.3700 and as long as the currency pair holds above this level, a test of 1.38 is likely.