Euro Sterling Exchange Rate (EUR/GBP): EUR Underperforms GBP, More Losses Ahead

By Will Peters

The euro to pound sterling exchange rate remains under pressure on Thursday with analysts pointing out that further declines in the currency pairing is still highly likely.

The euro to pound sterling exchange rate (EUR/GBP) is trading 0.02 pct lower at 0.8251 in late afternoon trade in London.

(Note: Our EUR/GBP quotes are from the spot markets. Your bank will charge a spread on the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.)

This has been another day in which the euro pound exchange rate has been dictated to by a stronger GBP which found further support today from a neutral Bank of England.

The Bank opted to leave rates and quantitative easing unchanged while choosing not to provide any changes to the forward guidance policy.

This neutral move underscored the UK currency in light of the growing views that the Bank may try and lower its unemployment target to below 7% - such a shifting of the goal post would have dented the GBP rally.

Outlook favours further EUR/GBP declines

Consensus amongst those analysts we follow remains negative on the EUR/GBP.

Sean Lee at FXWW says:

"As I’ve been saying for the last few days, this pair continues to look constructively bearish and a test of the bottom of the bear channel near .8200 seems very likely.

"I think that this cross will trade below .8000 (GBP/EUR @ 1.25) in Q1 but progress is usually slow and steady so be prepared to cover your shorts on any silly dips and reload on rallies."

Luc Luyet at MIG Bank is also forecasting further declines:

"In the longer term, the underlying bearish trend and the lack of any reversal pattern favour further weakness towards 0.8160 (61.8% retracement from the 2012-2013 rise). However, monitor the test of the support at 0.8253."

ECB's Draghi sounds bearish

The euro was sold-off in the early part of Thursday afternoon thanks to a dovish sounding ECB President Mario Draghi.

Addressing the media following today's policy decision announcement Draghi stressed the ECB's concerns over low inflation.

He barely acknowledged the momentum in Germany's economy and simply said incoming data confirms the ECB's previous assessment and warned that growth risks remain "on the downside."

"With inflation expected to remain low for at least the next 2 years, interest rates will remain at the present or lower level for an extended period," note Kathy Lien at BK Asset Management.

The ECB also said they have strengthened their forward guidance approach - this prompted a broad-based sell-off.