GBP/EUR Rate Week-Ahead Forecast: Sterling Could Move Below €1.10

The Pound to Euro exchange rate's steady downtrend continues and although the pair has now stalled momentarily our technical studiess uggest it will ultimately extend.

The exchange rate has stopped at the S1 monthly pivot at 1.1035; pivots are significant chart levels where prices can churn or reverse.

Traders often use them as entry points to scalp bounces counter to the prevailing trend.

Modelling future price trends, however, leads us to favour an eventual continuation lower.

A break below the 1.1000 level would probably confirm a move down to the next target at 1.0915 where support from the S2 monthly pivot kicks in.

The MACD indicator is converging mildly with price and lacks downside vigour, however, not enough to lead us to expect a reversal higher.

Data for the Pound

A rather thin week for UK data kicks off on Monday morning with Halifax House prices at 8.30 BST and the consensus estimate arguing for a 2.0% rise year-on-year and a 0.2% rise month-on-month.

Given House Prices fell a hefty -1.0% in June, analysts will be checking whether that was just a blip on the cardiogram rather than a deeper decline as a consequence of the economic slowdown.

Then at 00.01 on Tuesday, the BST, British Retail Consortium’s Retail Sales monitor will be released.

This is a sentiment survey asking people in the Retail sector how things are going.

Analysts may being paying more attention to it given the rising rate of inflation and the squeeze in real earnings this has created.

On Thursday, August 10, the RICS House Price balance is to be released, with a probable 8.0% rise expected.

At 9.30 on Thursday we have Industrial and Manufacturing Production for June.

The Trade balance for June is out at the same time, and is expected to show the deficit narrowing to 11.00bn from 11.86bn previously.

The data is unlikely to shake the Pound so keep an eye on technical trends, Brexit-orientated headlines and external drivers.

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Data for the Euro

The main releases for the Euro in the week ahead will be on Friday August 11 when Inflation data – including harmonised inflation - is released for the four largest economies in the Eurozone.

This is likely to be a key release for the Euro, given how much focus there is on the European Central Bank (ECB) and expectations for them to normalize policy.

Inflation in the Eurozone remains sluggish and the sharply rising Euro is likely to be a headwind going forward.

German data is first out, at 6.00 BST, with the year-on-year rate forecast to dip to 1.6% (from 1.7% prev) in July.

French data is out at 6.45 and forecast to show a 0.7% (unch) rise in the same period.

Spanish Inflation, out at 7.00, is expected to come out at 1.5% (unch), and Italian, out at 8.00 is estimated to rise to 1.2% (from 1.1% prev).