UPDATED: Euro to Pound (EUR/GBP) & EUR/USD (EUR/USD) Forecast: USD in the Driving Seat Thanks to Good News

No major data from the euro in the immediate future, however traders are digesting Eurozone inflation figures; CPI slipped further in July to 0.4% y/y, the lowest level since 2009.

"The weakness in headline CPI is unlikely to trigger more action from the ECB, given the comprehensive collection of easing measures announced in June (which are yet to be implemented). Nevertheless it will support the underlying weak sentiment towards EUR," say Lloyds.

Euro rate today - at the time of writing the following quotes are available:

• The euro to dollar exchange rate (EUR/USD) is 0.06 pct lower on a day-to-day basis at 1.3383.
• The euro to pound exchange rate (EUR/GBP) is 0.33 pct higher at 0.7957.

Please note that the above quotes are taken from the wholesale markets; your bank will affix a spread to the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency in some instances. Find out more.

Euro rockets higher against the pound

The standout move on global FX at the start of the new month concerns the British pound.

The UK currency has had a strong summer run, particularly against the euro, and some unwinding must be expected.

The catalyst for this move appears to be the release of the UK Manufacturing PMI on Friday which came in at 55.4. Markets had been looking for a reading of 57.2.

Traders will see this reading as an excuse for the Bank of England to hold back on raising interest rates.

EUR downside bias looks set to continue

We would expect the downside bias in the euro exchange rate complex to remain a feature of the near- to long-term.

At the heart of this premise is the continued under-performance displayed by the Eurozone economy particularly when compared to the US and the UK.

Interest rate hikes are predicted to start in the UK early in 2015 while the same certainly can't be said for the Eurozone whose central bank continues to toy with the ideas of loosening policy further.

In such an environment it is hard to see any potential for the euro to rally against the pound.

Karen Jones at Commerzbank tells us further losses should be expected at this stage in the euro to dollar exchange rate:

"EUR/USD continues to grind slowly lower. A negative bias will remain entrenched below the 1.3550 2 month downtrend. Directly below we find the 1.3391/1.3385 55 MONTH ma and the base of the monthly cloud and failure here is expected to provoke another leg lower.

"A close below 1.3385 is expected to act as a catalyst on the downside and act as a trigger for a slide to the 1.3295November 2013 low en route to 1.3020/00, the 50% retracement of the move up from the 1.2042/July 2012 low.

"Current position: Square Recommended trade: Reinstate shorts on rallies to 1.3485, add 1.3525, stop 1.3560."

Euro pound outlook: Negative

According to analysts at ICN Financial, we should not be expecting any new-found strength in the euro pound:

"The outlook is negative below 0.7925 with the risk-limit above 0.7980

"The pair continues to trade between the MAs 50 & 100 while the general downside move is valid over intraday and short term basis, depending on stability below 0.7945. The downside targets start at 0.7825 and extend toward 0.7755 and a breach of 0.7945 will be positive in support of the pair reaching the target at 0.8160."

Pound dollar exchange rate extends lower

Meanwhile, the soft bias in the pound dollar rate remains another key theme in global FX.

The British pound ended the day lower against the greenback on the back of mixed housing market numbers.  

Mortgage approvals rose 67.2k in the month of June up from 62k in May - the first improvement in 5 months.  

"Unfortunately the stronger number, which drove sterling to test 1.70 was offset by a decline in net lending. As a result, the knee jerk rally in sterling faded quickly as investors came to realise that the latest numbers do not increase the odds of central bank tightening in 2014," says Kathy Lien at BK Asset Management.

Earlier this year mortgage approvals declined after the U.K. government introduced tougher affordability rules and this also helped to ease house price growth.  

Later this week, the Nationwide House Price report will provide us with more insight into whether the rebound in mortgage approvals has translated into stronger price growth.