GBP/EUR Today: GBP/EUR on the Cusp of a Solid Break Higher

Investors have rushed in to the market to pick up cheap euros ensuring the pound euro exchange rate (GBP/EUR) remains capped below the 1.27 level.

There has been a lot of interest in the euro lately with the shared currency benefiting from an improvement in sentiment - stock markets have risen and optimism regarding the Eurozone is returning.

But, is it the pound sterling that looks intent to have the final say this October. As we head into month end it is the GBP that looks to be taking the upper hand.

• At the time of writing the pound to euro exchange rate (GBP/EUR) is seen trading 0.31 pct higher on a day-to-day basis having reached 1.2728.

Note: If you are looking for a higher rate ask your FX provider to put the relevant buy and stop-loss orders in place to ensure you get the right rate when it is hit, find out how here.
Note 2: The above levels, and all rates quoted here, are from the inter-bank markets - your bank will affix a spread at their discretion when passing on a retail rate. However, an independent provider will seek to undercut your bank, thereby delivering up to 5% more FX in some instances. Please find out more.

Buyers Boost Euro Exchange Rate Complex, But Will Sterling Soon Catch a Break?

The euro has this week caught a bit of a break in generally well-received results from European bank stress tests that showed the continent’s financial sector in reasonably sound shape.

A recovery in Eurozone stock markets will also certainly have helped boost demand for the shared currency as money flows back into the currency block to pick up discounted stocks.

That said, the pound sterling could soon catch a break.

"The euro’s façade of serenity could be deceiving, however, with top-tier data due from the euro zone Friday on inflation and unemployment, two of the strongest headwinds on the 18-country economy that have it on the brink of recession," says Manimbo.

The pound has withstood a raft of negative comments from various members of the Bank of England's Monetary Policy Committee (MPC) who have made efforts in communicating that interest rates are not due to rise anytime soon.

Despite their best efforts rate expectations and the pound exchange rate complex have stood their ground.

That the pound to euro still remains just below 1.27 suggests to us that it will take a good data surprise to push the GBP/EUR higher through this stubborn resistance level.

Next week we get the much-watched PMI data series which could well ensure the next leg higher in the long-term rally takes place. Any disappointments though and those looking to purchase euro's will have a lot more waiting to do.

Sell The Pound Sterling in November Say ANZ

According to ANZ Research November is typically a bad month for the pound; an observation that will ebolden the GBP bears.

"For the month of November in the 2000 - 2013 period, among the G10 currencies, GBP has shown the highest tendency to depreciate against the USD.

The currency has fallen in 10 out of the last 14 years during November. However, the average percent spot loss is not large at 0.5% say ANZ.

ANZ advises investors looking for the strongest seasonal pattern in November to consider pairing GBP with CHF (selling GBP/CHF). This is interesting in that CHF correlates stongly with the euro, and thus GBP/EUR, as the Swiss central bank defends the CHF exchange rate floor.

"The depreciation in GBP is amplified when paired up against CHF, with this cross falling in 11 out of the last 14 years for an average spot decline of 1.0%," ANZ tells clients.

On the macro perspective, ANZ also expects any GBP upside to be limited in the near-term:

"The BoE has become more dovish due to rising short-term risks to growth emanating from Europe and slowing inflation. Rates market pricing for the BoE’s first interest rate hike has been pushed out to Q2. This will keep upside in sterling capped in the near term."