Best GBP/EUR Exchange Rate of 2014 STILL Within Reach: Are You Ready to Buy (or Sell) GBP vs EUR?

July and August will be noted for its bout of sterling weakness, however many had expected the dip to be shallow owing for the comparable strength of the UK's economy over its Eurozone counterpart.

Momentum has swung back in favour of GBP and the best level of 1.27 reached on 21st July 2014 is a possible target in the near-term. That said, a decisive break above this level could turn out to be a hard task as it has been rejected at these levels on many an occassion in 2014 (See above graph).

On Tuesday we did however see the pound to euro exchange rate (GBP/EUR) plummet by 0.80 pct to reach s at 1.2543 as the volatility posed by the Scottish referendum on independence becomes hightened. (See below).

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(Ensure your FX provider has a buy order set up so that when your desired exchange rate is reached your order is triggered. This strategy could deliver up to 5% more currency. If you are worried about falls ensure a stop-loss is set - the level below which you are not prepared to go, please learn more here).

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Euro Weakness Forecast (BUT Beware the Rebounds)

The euro is likely to see losses continue against the pound - a lot of this weakness will be coming in sympathy to losses seen against the dollar.

The euro dollar exchange rate remains under pressure and this will undermine the shared currency against the other key majors.

However, an analysis from Morgan Stanley warns that a rebound could be possible:

"We remain bearish on EURUSD but look to take profit at 1.31. After, we expect a correction higher, where we would look to sell again. We note that our positioning tracker is currently at -6.

"In the past when it has reached around these levels, there has been a EURUSD rebound.

"So with the extreme positioning, we will be watching for any positive data out of the EUR area that could, cause the rebound and provide better levels to sell at. This week the focus will be the ECB and if they sound dovish."

Scotland Could Spoil the Pound's Party

While the euro is widely expected to cede the best exchange rates of 2014 in coming weeks, there are risks for the pound.

Analysts at BNP Paribas confirm that Scotland’s independence referendum, is a key risk event heading into the autumn:

"Our base case is that on September 18, Scotland votes against independence, particularly given the narrowing popularity of the ‘yes’ camp for independence.

"Nonetheless, there will be heightened uncertainty heading into the referendum. A ‘yes’ vote would lead to prolonged uncertainty over the agreement of currency union, institutional arrangements, and debt negotiation.

"In this context, GBP volatility will spike if past history is anything to go by."