Pound euro exchange rate forecasts remain positive, But GBP/EUR in corrective move lower today
- Written by: Gary Howes
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The British pound has fallen back against the Euro on Thursday morning, however forecasters suggest further gains remain possible for the UK currency.
The British pound to euro exchange rate (GBP/EUR) is quoted as being half a percent in the red at 1.21743 at 10:30 in London. This is a deep pullback from an overnight high of 1.2242.
We are certainly seeing a touch of profit-taking on yesterday's strong rally in this currency pair.
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Ahead of the current move lower that we are seeing, Sean Lee at FXWW warned that the euro was oversold against the British pound (EUR/GBP):
"Sitting on base of recent bearish trend channel. This suggests that the market is somewhat oversold (but that bear trend remains in play); I would not recommend going long against this trend until a daily low forms at channel lows, existing shorts can certainly consider booking some profits near current levels at 0.8170."
Big moves higher in sterling over the past 24 hours
There were big moves in Sterling crosses yesterday as we learnt that the UK unemployment rate dropped to 7.1% from 7.4% last month.
This was a major surprise, coming in well below the 7.3% market consensus, bringing the unemployment rate dangerously close to the milestone 7% rate that Governor Carney highlighted in his guidance a few months ago.
"This sent GBPUSD flying through 1.6500 and GBPEUR following suit and trading higher through 1.2200. Our traders are now watching 1.6605 in Cable and 1.2242 in GBPEUR as the next levels of resistance. We are trading very close to both levels this morning," says a currency note issued by Investec.
At the same time as the employment data was released, we learnt from the Bank of England minutes that whilst the MPC thinks that the jobless rate may reach 7% materially earlier than forecast, they feel there is ‘no immediate need’ to raise rates.
Although there is nothing new here, this was not enough to dampen the Sterling rally as it implied that although rate rises may not be immediate, they may be coming sooner than previously predicted.
"In addition, Government revenues were up, spending was down and less money was being borrowed on the fiscal side of policy keeping the UK on track to be under OBR UK borrowing estimates and so the proud Pound continues its march! UK yields rallied, US yields followed closely behind," say Investec.
Forecast for the British pound to euro exchange rate
For those looking out for pound euro exchange rate forecasts the latest views of Danske Bank are a must-read.
We look to add to this pro-Britsh pound theme with a few shorter-term forecasts.
We hear from Piet Lammens at KBC Markets who say yesterday's break above 1.2158 improves the technical picture of GBP/EUR further.
In case of a correction, KBC pullbacks as an opportunity to buy.
A technical forecast issued by MIG Bank also notes that the pound to euro exchange rate has broken resistance at 1.2158.
Resistance to further upmoves can be found at 1.2255 (a retracement level) and 1.2373.
The short-term technical configuration is positive as long as prices remain above the hourly support at 1.21 (20/01/2014 low). Another support lies at 1.2068.
