British Pound (GBP) Could Hit 1.1764 Against the Euro

Updated: The GBP exchange rate complex has come under pressure once more at the start of April with the entire Markit PMI series missing the mark. However, many analysts continue to consider the latest price action as being representative of consolidative price action.

April will be pivotal for the UK unit - can the uptrend reassert itself or will we continue to see more of the same?

Keep in touch with our Live Coverage Here. For the archived material for the day in question please scroll through please scroll down. 

By Will Peters

Could the pound sterling be in for a more prolonged period of decline? We bring you the latest views as they are issued.

Live Exchange Rates

The Pound Sterling (GBP) vs:

• The euro (GBP EUR):
  1.1979
• The US dollar (GBP USD):
  1.2604
• The Aus Dollar (GBP AUD):
  1.9396
• The Canadian Dollar (GBP CAD):
  1.7769
• The New Zealand Dollar (GBP NZD):
  2.1516
• The South African Rand (GBP ZAR):
  22.7987

13:19: Germany seen fuelling Euro strength

This note from Boris Schlossberg at BK Asset Management on the strength of the euro exchange rate complex:

"The rise in the euro has taken many analysts by surprise given the lacklustre economic environment in the region. However, the pair has been helped by strong portfolio flows and a rock solid Current account surplus driven higher by the strong performance of the German economy which dominates the economic activity in the monetary union.

"So far the appreciation in the exchange rate has not had any significant drag on Germany's export sector. However, if the pair continues to climb and trades through the 1.4000 level the outcry from the region's corporate sector is sure to rise and the ECB may finally take note of the appreciation in the unit."

11:42: Cable in Bullish Reversal

Good news for the GBP-USD bulls, an analysis by Swissquote Research suggests the bull scenario remains intact:

"GBP/USD moved below the key support at 1.6584 yesterday. However, the subsequent rise has validated an intraday bullish reversal. The resistance at 1.6686 (previous support) is challenged. Another resistance stands at 1.6786 (07/03/2014 high).

"A support now lies at 1.6569 (12/03/2014 low). In the longer term, the technical structure favours a bullish bias as long as the support at 1.6220 (17/12/2013 low) holds. The decisive break of the resistance at 1.6668 opens the way for a move towards the major resistance at 1.7043 (05/08/2009 high). The recent weakness still looks like a correction within an underlying uptrend."

10:18: Longer-term, Commerzbank remain negative on EUR-GBP

The strength in EUR-GBP is one of the highlights of the FX markets at present.

Analyst Axel Rudolph at Commerzbank has the following to say on the pair's outlook:

"On Wednesday EUR/GBP broke through the .8348/50 January/February and current March highs with the .8391 late December high thus being in the picture. Should this level be exceeded, the 200 day moving average at .8427 will be back in the frame.

"Medium term we thus still look for a re-test of the 55 day moving average at .8272 and the .8253 December low in the first instance. Below these lies the .8231 January 9 low. Strong support comes in between the .8205 March 5 low and the .8159 February low. Once this has given way, the long term Fibonacci support (the 61.8% retracement of the move in 2012-2013) at .8160 will be in focus.

"We remain longer term still negative and failure at .8160 will target.8000/.7963. It is the 78.6% retracement of the move up from 2012.

"Sell at .8380, add at .8420 with a target at .8200 and stop at .8467."

08:49: GBP-NZD 0.4% down

The RBNZ announce to raise the interest rate by 25 bps to 2.75% as expected, the first increase in almost four years. The Bank also lifted the GDP growth forecast in 2014 and 2015 from 2.8% to 3.0%, and from 3.0% to 3.5% respectively.

NZD rose strongly due to the rate hike and also the strong hawkish statement.

08:39: Sterling exposed by light calendar

Lloyds Bank Research say solid news is required to prompt a recovery in sterling:

"There is nothing on the UK calendar today, so with little potential for positive UK news its likely GBP will remain vulnerable to the downside after displaying a softer tone all week. The underlying UK story remains positive but market positioning is already quite long GBP. The IMM data shows that as of 4th March, GBP long positions were at relatively extended levels by historical standards. These positions are likely to have pared back slightly over the past week. We expect some positive UK news will be necessary to prompt a solid recovery in GBP, but we may have to wait until next week, when there are key releases from the UK (labour market data, MPC minutes)."

08:30: Euro pound exchange rate could take out 0.8500

"The British pound extended its losses against the euro but consolidated versus the U.S. dollar.  For the past 5 trading days, EUR/GBP has moved higher and is now trading at its strongest level in more than 2 months.   With the British pound falling victim to profit taking and euro benefitting from stronger German data and optimism from the ECB, the recent strength in EUR/GBP could take the currency pair towards 85 cents." (That is GBP-EUR at 1.1764). - Kathy Lien at BK Asset Management.

08:25: More profit taking ahead for the British pound (GBP)?

Kathy Lien at BK Asset Management is of the opinion that the UK currency could find the going tough in this environment of light economic newsflow:

"The only piece of U.K. data released today was the National Institute of Economic & Social Research's GDP estimate, which was revised up from 0.7% to 0.8%.  The outlook for the U.K. economy remains bright but with no major economic reports scheduled for release over the next week, overstretched positioning could lead to more profit taking.  Tomorrow the trade balance will be released and despite an improvement in industrial production and manufacturing activity, the trade deficit is expected to widen which would be negative for sterling."

Sterling under pressure

The past 24 hours have seen further losses registered against the euro, the shared currency has been on a tear higher and no doubt this will be making the team at the European Central Bank nervous.

There is little the ECB can do about the issue until at least next month, so expect further EUR strength from here.

Meanwhile, there is little desire to take sterling higher against the remainder of the majors. Indeed, the currency has only found interest from sellers of late. We don't expect any recovery in the currency in the foreseeable future.