Profit taking at the end of a good week is possible threat

This morning's gains made by GBP-EUR, if held, would confirm a good week for the British pound, as Mark Deans at MoneyCorp confirms:

"Anyone forecasting on Monday morning that sterling would be able to hold its own through to the end of the week would have been dismissed as a dreamer. But that is exactly what has happened. Indeed the pound is firmer on the week against most currencies."

The latest short term forecasts for the pound to euro exchange rate confirm that momentum remains with sterling, despite this morning's decline. Trading Central see further declines in EUR-GBP (GBP-EUR gains):

"Losses are forecast below 0.8645 with 0.8575 & 0.8555 in sight. The upside penetration of 0.8645 will call for 0.8675 & 0.871."

Nevertheless, we question the ability of sterling to continue advancing against the euro in the longer time frame.

UBS have today told clients they are bearish on sterling versus the euro saying they expect EUR-GBP to make gains:

"The recent downside should be limited with a strong support at 0.8590. With the MACD above its zero line, focus is on upside towards 0.8647 and then, 0.8815."

The immediate threat to the British pound at present is profit taking at the end of a good week.

"Investors might decide to take profits on their long-sterling positions, undoing much of the week's good work," warns Deans.

Public finances under scrutiny

Domestically, after a busy week for economic releases, attention turns to is on the public finances for June.

UK Public Sector Net Borrowing was at £10.234 billion in June, official figures released by National Statistics show, following £12.770B billion registered in May. Analysts expected £9.450 billion.

This is disappointing but has not stopped the recovery in the pound to euro exchange rate.

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