We ask a number of leading analysts where they see the EUR to GBP exchange rate heading over coming days.
The euro has been in the ascendency against sterling for two months now allowing those with outstanding euro to pound payments some of the best levels from which to convert in a year.
The question for those looking to make payments is whether they will see their recent advantage continue to grow.
The underlying picture certainly is one that favours those looking to hold out as momentum remains firmly behind the euro and as always we see it as futile to fight the trend.
That said, of course trends don’t last forever, so it is important to understand just how the market is positioned and what the outlook holds.
Euro to Pound Forecasts Week Beginning 15th February.
We have asked some of the leading minds where they see the EUR/GBP heading. Here are their answers:
Head of Technical Analysis at Societe Generale, Stéphanie Aymes:
“After achieving crucial support at 0.70/0.68, EUR/GBP has embarked on a recovery. The pair confirmed a double bottom and is now breaking above graphical resistance levels at 0.7750.
“A sustained move above will signal extension in recovery towards September 2014 highs of 0.8070/0.81. 0.75/0.7450 should be an important support.”
Gajan Mahadevan at Lloyds Bank:
“Similarly to EURUSD, near-term technical topping signals, in conjunction with divergence in momentum, proved useful indicators through last Thursday and Friday, as EURGBP failed to decisively break important resistance around 0.7875/80 and subsequently traded down below 0.7750.
“We feel a further short-term corrective phase may be in progress. As such, there is a risk of at least a pullback to test trend support in the 0.7670-0.7570 region, which would tie-in with EURUSD moving toward 1.1170-1.1050.
“Longer term, a decline back through 0.7500/0.7450 is needed to negate the trend from the 0.7000 lows, and move us back into a range process. While key supports hold, we cannot rule out an eventual push towards long-term trend resistance in the 0.80-0.82 zone.”
Peter Rosenstreich, Head of Market Strategy at Swissquote Bank:
“EUR/GBP continues to challenge the support at 0.7713. Hourly resistances stand at 0.7755 (20/01/2016 high) and 0.7821 (12/02/2016 high).
“In the long-term, the technical structure suggests a growing upside momentum. The pair is trading well above its 200 DMA. Strong resistance can be found at 0.8066 (10/09/2014 high).”
What to Watch this Week: GBP’s Crunch-Time
The pound sterling will likely hog the limelight this week with the most important risk event for the GBP this week is the 18-19 February EU Summit.
“We expect a correction lower in EURGBP in case an agreement is reached at the meeting, although an impasse and further GBP weakness is a non-negligible possibility,” says a note from Barclays ahead of the event.
There are some important economic numbers due out this week though. The GBP will likely be supported by an expected uptick in inflation (Tuesday).
Barclays forecast January headline CPI to print at 0.5% y/y (consensus: 0.3% y/y), as base effects from oil prices and food price wars fall out, while core CPI is expected to remain unchanged at 1.4% y/y.
Furthermore, the bank looks for a solid employment report (Wednesday).
Analysts forecast December 2015 average weekly earnings growth to accelerate (to 2.4% 3m/y) due to bonus pay, while December core wage growth is likely to remain unchanged (at 1.9% 3m/y), although they acknowledge downside risks.
Barclays expect the December ILO unemployment rate to dip 0.1pp to 5.0%, in line with consensus.
Finally, analysts expect total retail sales (Friday) to accelerate 1.3% m/m (4.1% y/y) (consensus: 0.8% m/m, 3.6% y/y) after a significant downside surprise in December.
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