GBP/EUR Forecasts Today: Hopes for GBP/EUR Rally 'Dashed on the Rocks of Disappointment'

The British pound (GBP) continues to slide against most of its major competitors as UK economic data fails to offer markets upside surprises.

"High hopes of a GBP comeback were dashed on the rocks of disappointment after the most important PMI figure showed that the rate of expansion in the UK Services sector slowed," says Myles Baxter at Caxton FX in a currency forecast note referencing last Friday's release of the all-important Services PMI.

Disappointing data is in turn feeding into interest rate expectations. If the Bank of England pushes back its date for rate hikes so the GBP will fail to find upside support. According to Lloyds Bank, "sentiment towards GBP remains somewhat subdued, underpinned by the market’s relatively dovish rate expectations for the UK; the OIS curve suggests the first rate hike is priced in for May/June 2015."

• The pound to euro exchange rate (GBP/EUR) is 0.24 pct lower, the conversion rate is at 1.2675.
• The euro to pound sterling rate (EUR/GBP) is at 0.7890.

Please note all the above rate are subject to a discretionary charge when delivered by your bank. This can drive costs up by 5%, find out how to minimise this exposure.

If you are looking for the best rate Don't Hesitate, ensure your FX provider has the correct stop-loss and buy orders ready, find out more.

Gains for GBP Could Be Harder to Achieve

The longer-term rally in pound sterling remains intact and we have no reason to doubt the trend into 2015.

However, near-term weakness is expected for a number of reasons.

According to Piet Lammens at KBC Markets the pound will likely struggle to push the euro much lower:

"Later this week, the calendar in the UK is moderately interesting We keep an eye at the UK production data (Tuesday), the BoE policy decision and the trade balance data on Friday. Sterling has been in really good shape lately but we don’t see a trigger for a new sterling up-leg anytime soon.

"Of late we indicated that it might be difficult for EUR/GBP to break the key 0.7755 support. Further down the road, the focus for sterling trading should return to the economic fundamentals and to the guidance from the BoE on policy normalisation.

"After the recent rebound of sterling and the soft comments from the BoE minutes, investors are pondering the chances for further sterling gains."

Longer-Term: Sterling Could Head up Towards 1.3

As mentioned though, the longer-term picture does still ultimately favour the UK currency over its Eurozone neighbour.

Bill McNamara has been keeping an eye on the bigger picture and has the following to say about the forecast:

"The UK currency has run into selling pressures once again as it tests resistance in the region of 1.285 (i.e. the intermediate peak from 2012) although the broader technical picture is still suggesting that this is likely to be a temporary phenomenon.

"Given the divergent monetary policies in the two areas it cannot be too long before sterling is back above 1.30."