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Oversold British Pound to Bounce Back v Euro

Oversold British Pound to Bounce Back v Euro


So where next for Sterling? Firstly, the GBP/EUR exchange rate is looking oversold on the near-term charts.

Euro

Pound to Euro Latest

1.1492▲

0.4%

Previous Close:

1.1446

Today's High:

1.1493

Today's Low:

1.1454

US Dollar

Pound to US Dollar Latest

1.2837▲

0.34%

Previous Close:

1.2794

Today's High:

1.2849

Today's Low:

1.2798

Australian Dollar

Pound to Australian Dollar Latest

1.7246▲

0.35%

Previous Close:

1.7185

Today's High:

1.7279

Today's Low:

1.718

New Zealand Dollar

Pound to New Zealand Dollar Latest

1.8136▲

0.21%

Previous Close:

1.8097

Today's High:

1.8214

Today's Low:

1.8116

South African Rand

Pound to South African Rand Latest

16.6604▲

1.29%

Previous Close:

16.4476

Today's High:

16.6871

Today's Low:

16.1845

Canadian Dollar

Pound to Canadian Dollar Latest

1.7249▲

0.25%

Previous Close:

1.7206

Today's High:

1.7287

Today's Low:

1.72

Forecast for British pound to euro exchange rate from Bank of America favours GBP into 2014

Update: Nomura offer aggressive pro-GBP forecast.

Following on from yesterday's Bank of England Inflation Report we note the British pound to euro exchange rate remains on the front foot and is maintaining a rate north of 1.19.

Please keep in mind all quotations here are inter-bank spot rates. Your retail rate will be delivered with a spread being subtracted by your bank at their discretion. This is a competitive market though and the good news is that an independent FX provider will seek to beat your bank's rate, thus delivering up to 5% more FX. Please learn more here.

There was a slip-up following on from today's release of retail sales data at the ONS, however the recovery confirms markets are more comfortable holding GBP at this stage.

The pro-GBP theme is furthered by Bank of America Merrill Lynch who have confirmed to clients that they see further pound euro exchange rate gains as we move into 2014.

According to analyst Nick Bate economic data will remain the key driver for sterling.

But, further positive data surprises will be needed to match the Bank's growth forecasts and at the same time support sterling.

In addition, "the evolution of the labor market will be important in assessing the level of slack in the economy. The BoE revised labor market forecasts despite a relatively benign change in inflation and growth expectations - suggesting a small structural shift in their view of spare capacity," says Bate.

A further improvement would lower capacity expectations (today's data has already pushed in that direction) and would support sterling.

"We remain bearish EUR/GBP, targeting £0.80 by next year. A close to trend UK economy with an improving labor market alongside disinflationary forces in the EZ keeping a dovish ECB should help to drive EUR/GBP lower," says Bate.

Turning the equation around to GBP/EUR this translates into 1.25 by next year.

The forecast echoes similar predictions issued by BK Asset Management, FXWW and Lloyds Bank which all have GBP/EUR pegged above 1.2 going forward.

 

Keep an eye on the UK's pay packet


The October Bank of England Inflation Report could well prove to be a watermark for sterling.

We heard how the unemployment rate could drop to the 7% threshold set in the forward guidance framework as early as next year.

However, this may still not trigger a pro-sterling interest rate rise. Governor Carney says he wants to see slack in the economy pick up before such an event.

This has seen commentators, and markets, start to focus on growth in wages as wage growth is seen as an indicator slack in the economy is being picked up.

Commenting on the matter Bate says:

"We were struck by several references to real wages during the Q&A (for example, the Governor saying that while stronger consumption has thus far been supported by declining savings, "in order for that to be sustained there has to be a rise in real wages").

"While not a formal part of the guidance framework the market would be well advised to keep a close eye on them, as they could be a very important factor in influencing expectations when unemployment drops close to 7.0%, of whether or not the MPC may then be prepared to sanction and signal modest monetary tightening, or might consider lowering the threshold, prolonging guidance and keeping Bank Rate at its current level for longer."

Also noting the importance of real wages is Stephen Gallo at BMO Capital Markets:

"Even if the unemployment rate falls further at a rather quick pace, our view is that the GBP leg of any GBPUSD strength will experience diminishing marginal returns from here, relative to the aforementioned pace of GBP strength during Q3.  

"All things being equal, as long as nominal wage growth remains very subdued, as it has done, continued downplaying of the fall in unemployment by the BoE will eventually for FX become an implicit pushing back of the first rate hike.  Seeing is believing."

Latest British Pound News

GBP LIVE TODAY

British Pound: Potential Election Outcomes and their Impacts on the Exchange Rate

26 May, 2017 |

With news that the Conservative party have had their lead slashed to 5% in the latest YouGov poll markets are quickly considering a future of coalition government, or indeed, Labour rule. What does this mean for the Pound?

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British Pound to Remain Vulnerable to Further Losses v Euro: Exchange Rate Analysts

25 May, 2017 |

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Pound Sterling Rises Despite Manchester Attacks - Here is Why

23 May, 2017 |

Manchester bomb attack been shown to have limited impact on global financial markets with the British Pound maintaining levels and trends that are in keeping with recent days.

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Pound Sterling: "Limited Upside Ahead" as Odds on Corbyn Win Slashed

21 May, 2017 |

The new week of foreign exchange trade gets off to a poor start for the UK currency with markets weighing up weekend news that Theresa May’s Conservative party has seen its commanding lead in the opinion polls whittled away.

GBP/EUR: News and Forecasts

EUR

5-Day Pound to Euro Rate Forecast: Technicals, Politics and Data to Watch

28 May, 2017 |

At the start of the new trading week, the consensus is that both the Pound and the Euro are susceptible to trading more softly over the next five days.

EUR

Oversold British Pound to Bounce Back v Euro

27 May, 2017 |

So where next for Sterling? Firstly, the GBP/EUR exchange rate is looking oversold on the near-term charts.

EUR

ING: Pound to Euro Exchange Rate Forecast on Potential Corbyn Win

26 May, 2017 |

A Labour government is now something financial markets are considering for the first time in years.

EUR

British Pound Melts as Labour Now Eyes Victory

26 May, 2017 |

The British Pound fell across the board ahead of the weekend on news that the UK Conservative party are on track to lose the upcoming election.

GBP/USD: News and Forecasts

USD

Pound v Dollar Reaching Critical Crossroads at the 1.2800 Level

29 May, 2017 |

The Pound to Dollar exchange rate was rallying up quite strongly until it hit a ceiling at the 1.30 level and started to reverse, rapidly lower.

USD

Pound Forecast to Potentially Slide to 1.2650 v US Dollar in Week Ahead

28 May, 2017 |

GBP/USD fell sharply from its 1.30 highs on Friday to 1.28 and it appears to be weakening across the board following renewed Brexit concerns.

USD

Pound to Dollar Rate: Potential Next Targets

26 May, 2017 |

The outlook for the GBP/USD exchange rate has taken a turn for the worse ahead of the long-weekend in the UK.

USD

Pound Sterling can Recover Against the Dollar, Euro say Capital Economics

26 May, 2017 |

Good news for those readers yearning for a stronger British Pound.

EUR/USD: News and Forecasts

Euro to Dollar

Euro to US Dollar Forecast for the Coming Week: Levels and Events to Watch

28 May, 2017 |

Analysts are overall more bullish about the Dollar than the Euro in the week ahead, as they expect robust payrolls data to cement the outlook for the US economy but moribund inflation data to reinforce the sluggishness of Europe.

Euro to Dollar

The EUR/USD is Headed Towards Top of 2-Year Range

25 May, 2017 |

A new trade is on the cards with the strategy team at Societe Generale.

Euro to Dollar

Euro / Dollar Forecasts at Credit Suisse Raised

25 May, 2017 |

Analysts at Credit Suisse have bumped up their forecasts for the Euro against the US Dollar.

Euro to Dollar

EUR/USD Rally: Traders Getting Ahead of Themselves

24 May, 2017 |

"We advise caution on the near-term outlook for EUR/USD." - Valentin Marinov at Crédit Agricole Securities.

GBP/AUD: News and Forecasts

AUD

Pound to Australian Dollar Breaking Lower, Outlook seen Deteriorating

28 May, 2017 |

Sterling has been losing ground across the board due to renewed Brexit fears.

AUD

Australian Dollar Forecast to Strengthen Against the Pound by Westpac

22 May, 2017 |

Analysts at Westpac Bank in Sydney are calling time on Pound Sterling’s recent strong run against the Australian Dollar.

AUD

Australian Dollar Could Be About to Find Its Feet say SocGen

19 May, 2017 |

The Australian Dollar rose temporarily after strong employment data boosted the outlook for the economy on Thursday but those gains proved ephemeral after it became clear most of the job gains had been part-time.

AUD

Australian Dollar a Hedge Against Trump Risks

18 May, 2017 |

The Australian Dollar received a boost from the April jobs report overnight which showed a +37.4k increase in employment but the big picture for the currency remains resolutely global in nature.

GBP/NZD: News and Forecasts

NZD

The Pound to New Zealand Dollar Forecast for the Week

28 May, 2017 |

GBP/NZD extended its sell-off last week despite contrary data bringing into question the superiority of the Kiwi over the Pound.

NZD

GBP/NZD Downmove Stalls After China Downgrade

24 May, 2017 |

The Pound to New Zealand Dollar (Kiwi) stalled in its new downtrend midweek after Moody’s downgrade of China dimmed the outlook for New Zealand’s largest export destination.

NZD

New Zealand Dollar Tailwinds on Milk Price Forecast and Improved Trade Position

24 May, 2017 |

The New Zealand Dollar continues to outperform its rivals with the recent recovery rally getting fresh impetus from impressive economic developments in New Zealand over the duration of the mid-week session.

NZD

The New Zealand Dollar: From Zero to Hero

23 May, 2017 |

The backdrop of a softer USD and firmer commodities prices has supported commodity-linked currencies.

GBP/CAD: News and Forecasts

CAD

5-Day Forecast: Pound to Canadian Dollar

28 May, 2017 |

The Canadian Dollar could well undergo volatile swings in the week ahead as the standout event on the calendar is likely to be the meeting of the Oil Cartel OPEC on Thursday, June 1.

CAD

OPEC Sends Oil and Canadian Dollar Lower

25 May, 2017 |

The Canadian Dollar was an under-performer on Thursday, May 25 as oil prices slid after oil-producing cartel OPEC failed to take the concrete measures required to keep prices elevated.

CAD

Canadian Dollar Outperforms after Optimistic Central Bank Statement

24 May, 2017 |

The Canadian Dollar has strengthened following the release of an optimistic Bank of Canada (BOC) rate meeting statement.

CAD

Pound to Canadian Dollar X-Rate Seen Peaking

17 May, 2017 |

There is a growing consensus amongst analysts, as we reach the middle of the week that the Pound to Canadian Dollar has peaked and is likely to continue selling off.

GBP/ZAR: News and Forecasts

ZAR

Zuma Hurts South African Rand as the New Trading Week Begins

29 May, 2017 |

Jacob Zuma’s survival at the helm of South African politics appears to have depressed the Rand at the start of the new trading week.

ZAR

The South African Rand Rallies on NEC Meeting Hopes, but Don’t Get Carried Away Warn Analy…

25 May, 2017 |

The Rand is one of the best-performers amongst the world’s top 20 currencies amidst these political developments and a broader global backdrop that has benefited this and other commodity-linked currencies. But can the positivity last?

ZAR

South African Rand: Strength in June

22 May, 2017 |

The Rand retains a choppy tone on global foreign exchange markets as it continues to take direction from external drivers.

ZAR

Quant Strategy Indicates Further Downside on Oil Currencies MXN and RUB

19 May, 2017 |

 A chart-based quantitative strategy which uses moving averages is signalling more downside for some of the major oil currencies, say Citibank in a note to clients.