Pound sees 1.18 vs EUR as being tantalisingly close... but yet still unattainable

The pound to euro exchange rate is currently 0.13 pct down on Thursday night's closing level; GBP/EUR is at 1.1763 at 10:30 in London.

1.18 is the next target for GBP-EUR, and this should be attainable if we subscribe to the view that sterling is cheap compared to the euro.

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The pound failed to advance towards the psychologically important level of 1.18 after it was shown that the UK Goods Trade deficit narrowed to £8.224 billion in April from £9.175 billion in March according to the Office for National Statistics.

Analysts expected the deficit to narrow to only to £8.800 billion.

The overall Trade deficit narrowed to £2.579 billion in April from £3.249 billion in March, below projections for a deficit of 3.100 billion.

The euro strengthens, but sterling clings to gains

The immediate driver for the pound to euro exchange rate will be the upcoming release of German Industrial Production numbers at 11 BST.

RBC Euro Economics tell us they are forecasting a rise of 1.0 pct m/m in April.

Consensus estimates are at 0 pct however - any releases on either side will likely nudge the GBP-EUR rate accordingly.

The euro is broadly stronger today - yesterday saw EUR advance as the ECB met expectations and kept interest rates on hold at 0.50% (as of course the BoE did).

"The euro was supported by Draghi’s comments that there was no need for negative deposit rates given the improvement in eurozone (especially German) data since the last meeting. This morning’s German industrial data will be watched for clues as to whether Draghi could make a move in July," says Richard Driver at Caxton FX.

With a stronger euro right across the board it is extremely encouraging for the pound sterling bulls to note that there was no budging the GBP-EUR lower.