Pound euro exchange rate today: GBP to EUR slips below 1.21 after strong rally
- Written by: Gary Howes
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The British pound (GBP) has registered a strong recovery against the Euro as of late, but we could be due a corrective move lower in the short-term.
The pound to euro exchange rate is trading 0.05 pct higher on a day-to-day basis having reached 1.2092.
The rate had been north of 1.21 earlier but we are seeing a correction lower after recent strong price action.
Karen Jones at Commerzbank had warned of the possibility of such a move:
"EUR/GBP has sold off to stronger support circa .8281/79 (50% retrace and Fibo). This has seen a small erosion, however we note the 13 count on the 60 and 240 minute chart and the TD resistance at .8260/45 and suspect that we will see near term consolidation/ a small rebound.
"Current Position: Shorts from .8373 covered .8280. Recommended trade: Attempt small longs at market, add .8255, stop .8240. Exit .8325."
Below: The GBP-EUR recovery.
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Also commenting on the technical outlook for the EUR-GBP are UBS who are still favouring the EUR:
"With bullish trend in place, there’s scope for extension of the strength to 0.8405, a break above this would open the way to 0.8467. Support is at 0.8308 ahead of 0.8250."
The pound exchange rate complex today
In the UK today it was shown GDP was confirmed to have grown 0.7% q/q and 2.7% y/y in line with market expectations.
A negative came from current account data which printed GBP -22.4B deficit versus GBP -14.0B expected; the total business investments accelerated from 8.5% to 8.7%.
A data-full week has comes to its end in the UK, and in all, it was positive.
On Tuesday, the CPI data confirmed the extension of weakness in inflation figures below BoE’s 2.0% target. On Thursday, the February retail sales unexpectedly increased to 1.7% from -1.5% contraction a month ago. UK closes the week with 2.7% GDP growth in the fourth quarter. The above-stated data stream lead to a higher GBP versus USD and EUR this week.
The euro exchange rate complex today
The euro exchange rate complex would rather forget the week past.
The EUR fell back through yesterday’s trade as the market continues to treat it as the preferred funding currency for carry trades.
Lloyds Bank today tell us their research shows the carry trade is back in favour amongst global investors - they are using cheap EUR to invest in countries that offer higher returns - e.g. Australia, Canada, New Zealand and the emerging world.
So while this dynamic persists we should continue to expect an underperformance by the Euro.
The outlook for the euro
The ECB meeting will be next week’s top event.
"We expect policy settings to remain unchanged, as the slowdown in March CPI (out next Monday) is likely to be largely driven by temporary factors. The most important issue will be if and how the ECB will decide to become more vocal about the currency," says a note from UniCredit Bank.
UniCredit think Mario Draghi will adopt a "soft" strategy here, dealing with the exchange rate only in the Q&A session and stressing that the ECB stands ready to act if currency appreciation were to endanger price stability.
