GBP/USD & Euro Forecast: GBP Firm vs the EUR But Continues to Suffer Against the USD

Indeed, we see the GBP entering a period of softness which could well last until the next month's data series gets under way on Friday with the first of the monthly PMI releases.

Until then the theme of weakness is forecast to play out. At the time of writing the following currency rates are available:

• The pound to euro exchange rate (GBP/EUR) is 0.01 higher on a day-to-day basis having achieved 1.2639.
• The pound to dollar exchange rate (GBP/USD) is 0.22 pct lower at 1.6908.
• The pound sterling to Australian dollar (GBP/AUD) is 0.48 pct higher at 1.8147.
• The Pound Canadian dollar (GBP/CAD) is 0.25 pct higher at 1.8438.

Please note that retail currecy rates are subject to substantial spreads when delivered by your bank. An independent FX provider can deliver up to 5% more currency in some cases by getting closer to the market rate.

In addition, if you do not wish to lose out on the best exchange rates ensure your provider has the relevant stop and buy orders in place. Find out more.

Forecasting further GBP pressures

"GBP has been under pressure since the start of the month.  IMM data shows net GBP longs have now halved since the start of the month. There are few key releases from the UK this week, with only Manufacturing PMI due out on Friday, so until then US data will likely to determine moves in GBP/USD.  Risks are an improvement in the US data will put further pressure on GBP/USD," warns a morning currency forecast note from Lloyds Bank Research.

The market appears to have been overly optimistic towards the prospect of early rate hikes following hawkish comments from Governor Carney’s Mansion House speech.

"Rate expectations have pared back over the past few weeks, and while UK data has been decent, it has failed to fuel market optimism towards the first BoE rate hike. This prompted the squaring of some GBP longs positions and saw GBP/USD lower. We view bias remains to the downside in GBP/USD unless we see some stronger than expected UK data or some weaker US data that would a move in 2y relative rate spreads in favour of GBP," say Lloyds.

Technical predictions: EUR/GBP trend remains bearish

Regarding the euro pound exchange rate outlook Swissquote Research tell us:

"EUR/GBP trades comfortably in the mid-range of June-July downtrend band (0.78673/0.79633). The overall bias remains bearish as long as resistance at 0.79330/0.79633 (21-dma / downtrend channel top) holds.

Also offering guidance on the euro pound is Karen Jones at Commerzbank:

"EUR/GBP last week sold off to the base of its down channel and bounced. The bounce has so far been pretty tepid and cannot seem to clear the 20 day ma at .7930. In fact the market has not seen anything more than marginal breaks of this moving average since the middle of March. However we also have the triple divergence of the daily RSI which suggests that the down move is exhausted for now. We noted the potential falling wedge and a close above .7930 should be enough to trigger a rally towards the .7991 2014 downtrend, where we would expect the rally to fail.

"Current Position: Long .7902 Recommended trade: Exit at market – the market should bounce but the 20 day ma is blocking so not clear."

Pound dollar forecast: GBP/USD at the end of the bull move?

Commerzbank's Jones says:

"GBP/USD’s failure at the 1.7195 resistance is increasingly looking like that was the end of the bull move, it has broken down as expected from its expanding top formation. Intraday we would allow for a small rebound from the 1.6955/55 day ma, but note intraday rallies are indicated to terminate circa 1.7035 and remain capped by the 20 day ma at 1.7099.

"Current trade: Short 1.7103. Recommended Trade: Lower the stop from 1.7110 to 1.7100. Exit 1.6905."

Pound dollar update: One month low reached

The pound was little moved at a one-month low against the dollar after U.K. GDP for the second quarter was exactly in-line with market expectations.

Britain’s economy grew by an expected 0.8%(q/q) and 3.1%(y/y) respectively in the second quarter. The growth in the nation’s economy finally put overall output back above its pre-crisis level.

And while the report did little for the pound against the otherwise stronger greenback, it did contrast the still anemic backdrop in the euro zone and helped push the pound back toward a 24-month high against the single currency.

"While the near 10-month run up in the pound against the dollar does leave it vulnerable to some more risk to the downside in the near-term, its losses should remain limited given the view that the BOE will begin raising borrowing costs sooner than the Fed and the ECB," says Omer Esiner at Commonwealth Foreign Exchange.