Pound Euro Exchange Rate Forecast to Test 1.29 and Then 1.37 in Early 2015

Indeed, one analyst we follow reckons the outlook is dominated by a potential test of the 1.29 level while others are predicting a test of 1.31 could be on the cards as interest rates in the UK and Eurozone head in opposite directions.

At the time of writing we see the pound to euro conversion rate at 1.2797 suggesting there is some decent potential upside to be had at the current time.

Outlook for Pound Euro: 1.29 in the Headlights

We hear from professional trader Sean Lee at Forextell who echoes sentiment elsewhere in the forex world that the British pound is preferred over the euro:

"EUR/GBP has been consolidating the past few sessions, but traded with a rather offered tone, the pair is now testing the daily low at 0.7822." (Daily high of 1.2784 in GBP/EUR).

According to Lee resistance to further gains is thus seen at 1.2812; a break of the 1.2820 level would however trigger system stops and pave the way for a 1.29 test. At the time of writing we note that this level of resistance did not break, but keep an eye on it for further guidance.

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Sell the Euro Against the Pound Say Barclays

Another technical viewpoint on the euro pound is offered by Barclays, and again it is pro-GBP:

"With the Scottish referendum behind us, the market will re-focus on economic fundamentals, and relative economic/monetary policy outlook favours shorting EURGBP.

"Our technical strategist notes that the consolidation phase of the past two months has resolved bearishly, in line with the prevailing downward trend and our greater bearish view, and expects further weakness towards 0.7755 (GBP/EUR strength to 1.2894), the lows of 2012.

"A break below there would allow room towards the 0.7700 (GBP/EUR @ 1.2987) area and further out towards targets near 0.7250 (1.3793), the former range highs from 2003. It would take a move above 0.8140 to suggest that the bear trend is running out of steam."

Morgan Stanley: Also Backing the Pro-GBP Case

Also suggesting there are yet further gains for sterling to enjoy against the euro are Morgan Stanley:

"For EURGBP, we believe that relative monetary policy will play a greater role, and here some further GBP relative gains are still possible and, as a result, we expect EURGBP to keep the pressure on the downside over the medium term.

"Initial rebounds to 0.7900 (slumps in GBP/EUR to 1.2658) are selling opportunities, in our view, targeting 0.76/0.75 (1.31 and 1.33) going into year-end."

GBP/USD to Remain Rangebound

"There’s no UK data of any note today, and little reason to expect GBP/USD to move out of recent ranges until there is some new information about the likely path of UK rates," says a comment issued by Lloyds Bank Research.

This may come from upcoming data, but there is also still some residual political uncertainty after the Scottish referendum as the parties position for next year’s election in the current conference season.

"While this is going on it may be hard for the market to look towards higher rates, and this may weigh a little on GBP, so if there is any bias it may be slightly on the downside," say Lloyds.