GBP Exchange Rate Prediction: Pound Euro (GBP/EUR) Shaping Up for a Stronger Month Ahead

However, the new month has been characterised by strong UK economic data and we are predicting better GBP levels ahead, particularly against the euro.

On Wednesday the pound to euro exchange rate (GBP/EUR) is quoted as being 0.10 pct lower on a day-to-day basis having last been quoted at 1.2612 - a strong recovery was seen on Tuesday.

The pair appears to be on target to achieve the best exchange rate of around 1.2652 witnessed at the start of the previous week.

If you are awaiting a higher GBP/EUR rate then don't hesitate, ensure your FX provider has the relevant buy orders in place so your order is exectued at the levels you desire. Likewise, stops should be in place to protect about falls. Please learn more here. 

Sterling sees a relief rally shape up

Sterling pared its recent losses to trade above a seven-week low after a much stronger than forecast PMI for the nation’s services sector, which makes up roughly 80% of Britain’s economy.

The PMI for services rose to 59.1 in July, its highest level in eight months, which handily beat the forecast for 57.9.

"The data reminded market participants that the U.K. economy continues to outpace the euro zone and U.S. and that the Bank of England will likely lead in eventual monetary tightening. As such, the pound’s pullbacks should remain relatively short-lived," says Omer Esiner at Commonwealth Foreign Exchange.

"Much better than expected UK services PMI ensured that GBP was effectively insulated from the USD strength that was seen elsewhere, and helped to send EUR/GBP down towards the recent lows," say Lloyds Bank Research.

Tuesday AM: Outlook for the pound this week, Can data go GBP's way?

There are some significant data releases due in the coming week that could see the pound reverse its recent poor fortune against the shared currency.

On Monday PMI Construction was release at 62.4, a reading of 62 was expected and it appears markets are content to buy sterling in small quantities on the news.

However, on Tuesday the all-important Services PMI will be released, watch for a figure of 57.9 - anything less will seriously hamper the GBP and set the tone for a poor August.

The Bank of England meanwhile give their August MPC policy decision. We, and the markets are expecting no change.

Euro's week ahead: ECB to dominate

Where the Bank of England is expected to deliver little fresh news of importance the same cannot be said for the European Central Bank (ECB) which forms the highlight for the shared currency.

"Front and center for the euro in the coming week will be an ECB meeting on Aug 7. Euro buyers, keep your ears pricked for any clues that further policy steps may be imminent. A more dovish tone from the ECB would put a heavier weight on the euro and contrast the outlook of increasingly less stimulus from the Fed," says a forecast note from Western Union.

Bank of America Merrill Lynch: A Weaker Euro From Here?

While the GBP has experienced weakness against the GBP recently it must be noted that the longer term trend is firmly to the upside.

Momentum studies on the weekly charts confirm the uptrend remains intact, however, weakness could be experienced in the near-term as a correction plays out.

Bank of America Merrill Lynch meanwhile note that there remains little positive sentiment for the shared currency at present:

"Anumber of indicators have converged towards a weaker Euro, and indeed the currency has been weakening in recent weeks.

"Core earnings disappointment, periphery risks after the BES events in Portugal, and geopolitical risks from Ukraine have triggered a sharp drop in the demand for Eurozone equities (see Liquid Cross Border Flows).

"Our quant report sees the USD bull trend snowballing. Our technical analysis urges investors to buy USD dips.

"While the  market is short EUR, this position is far from stretched (CFTC FX Futures Watch).

"Strong positive data surprises in the US and relative weak Eurozone data have also contributed to the recent EURUSD weakening.

"We do not expect the ECB meeting to affect the Euro this time. The ECB remains on hold for now, waiting for the implementation of the TLTORs and the results from its bank stress tests. The EUR could be subject to the ECB tone during the press conference, but we don't expect a sustained impact without a clear commitment to new easing policies, under more specific conditions."