What a gift Brexit has been for those transferring euros into pounds - the rate has moved in your favour considerably. The question you may be asking is whether even better rates are coming your way?
The rapid climb from 0.76 to 0.82 has certainly turned the outlook for the exchange rate positive.
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Often such moves shake up the underlying structure of the market in such a way that triggers a new trend.
However, the trend tends to be gentler, than the intial shock, therefore patience is required.
The EUR/GBP exchange rate has rallied up to a cluster of resistance levels which may halt the break-neck speed advance we have seen over recent days.
Levels of resistance to be aware of include a 7-year trend-line, and the R3 monthly pivot at 0.8394 - these techical levels are often used as launch pads by traders looking to profit on a counter-trend.
These levels are likely to prove a major obstacle to further gains and may result in a correction, with a possible move back down to 0.80 on the horizon.
If the up-trend extends higher, however, and breaks above the 0.8317 highs, that would confirm a move up to 0.8496.
It is worth noting that analysts can differ on where a trend-line ought to be drawn, withCommerzbank’s technical analyst, Karen Jones, drawing her 7-year trend-line slightly lower, and arguing it has already been definitively broken:
“EUR/GBP took out its major downtrend at 0.8114 following the Brexit vote, this was the 7 year down channel and this has completely altered the outlook. Next resistance is the 50% retracement of the move down from the 2009 peak at 0.8370”
Lloyds Bank’s Robin Wilkins is quite bearish, seeing a strong likelihood of a pull-back on the horizon:
“Intra-day studies suggest a pullback is possible, especially while this resistance caps. A decline through pivot support in the 0.8225/00 region would add further confirmation of that correction phase, with trend support lying in the 0.8050/0.7975 region below.”
Longer-term he expects this move higher to be the final leg in the up-trend:
“Long-term, aligned with the GBPUSD view above, we believe this move to the topside is the last within the correction from the 0.70/0.69 support region. We have no sign of a top yet though, with a move above 0.8370 leaving room towards resistance above there in the 0.8700-0.8900 region.”
Goldmans Release Latest EUR/GBP Forecasts
Goldman Sachs, the world’s third largest investment bank, but probably most infamous, have released their post-Leave forecasts for sterling following the EU referendum.
With regards to the EUR to GBP rate, new forecasts see the pair at 0.85, 0.82 and 0.78 in 3, 6 and 12 months.
This from a previously held 0.76, 0.74 and 0.70.
Interestingly, in the medium term, Goldman Sachs do think the Pound will regain some strength, with EUR/GBP falling to 0.70 on a 24-month horizon (versus 0.65 in their previous forecasts) and then to 0.65 on a three-year horizon (unchanged from before).
Latest Market Developments
The steadier tone to global markets on Tuesday the 28th has come as a relief to London markets which have been battered by unprecedented turmoil of late.
Days of heavy selling pressure on the U.K. pound and global markets abated, allowing the hard hit British currency to steady above its weakest level in three decades.
The pound has fallen alarmingly, shedding some 16 cents, or 11 percent, against the dollar since Thursday, a rout that came in the wake of Britain’s choice to depart the European Union.
Chancellor George Osborne has meanwhile insisted his ‘Project Fear’ warnings about Brexit are already coming to pass.
The Chancellor says the UK can look forward to further tax rises and spending cuts.
He said such austerity measures were “absolutely” necessary in order to secure the trust of international investors.
The Chancellor said his dire predictions about the impact on the public finances 'have started to be borne out by events' such as a tumbling pound and markets - despite a slight rally this morning.
“It is very clear that the country is going to be poorer,” he told BBC Radio 4's Today programme.