Pound flat as a pancake

GBP failed to react to today's lending data out of the Bank of England, details of which can be found at the 10:00 entry on our rolling live coverage.

Indeed, the British pound has done well to escape the data unscathed when we consider that we got a big miss on consensus forecasts.

UK Mortgage Approvals fell to 57.667K in June, from 58.071K registered the previous month, according to the BoE report published today. Analysts expected an increase to 59.500K.

Consumer Credit dropped to £0.5B in June from £0.8B in May.

"Any market reaction will be probably be guarded as investors will keep a wait-and-see mode ahead of Thursday’s BoE meeting. Even so, the downside in sterling should be rather well protected if data confirm the gradual improvement in economic activity in the UK, what we expected them to do," say Piet Lammens at KBC Markets."

UniCredit tell us they see the British pound maintaining a bias for losses against both the euro and the US dollar:

"We are still skeptical about riding a cable rally above 1.54, preferring to return short above that level. We also again favor buying EUR-GBP below 0.86."

Outlook for the pound euro exchange rate dominated by Bank of England and ECB

Jeremy Cook at WorldFirst says he is optimistic on the British pound as we head into Thursday:

"Thursday is Bank of England and European Central Bank day. The Bank of England are unlikely to move policy this week we think, certainly ahead of next week’s Inflation Report during which we are expecting further details of forward guidance to be announced. A hold of policy will be a sterling positive on Thursday, we wager."

However, UniCredit Bank don't see the BoE decision as being all that important: "This week’s MPC meeting is of secondary interest, as we wait to learn more about the BoE’s forward guidance on 7 August."

Regarding the European Central Bank decision cook says calling the outcome is tricky:

"Once again, the ECB meeting is a trickier one to read given the sea change in policy from never ‘pre-committing’ to future policy actions to the forward guidance of ‘expecting the key ECB interest rates to remain at present or lower levels for an extended period’. We doubt that we’ll see any rate action this month, especially considering next month’s meeting the committee will have updated growth and inflation projections."

The technical outlook for the euro pound exchange rate

With summer upon us and market movements remaining tight, technical guidance will remain an important driver of euro / pound exchange rate levels.

Luc Luyet at MIG Bank says he is backing the euro against the pound:

"EUR/GBP has significantly weakened after its 17 July bearish engulfing pattern. Therefore, the bounce near the support at 0.8575 needs to
break the resistance at 0.8647 (18/07/2013 high) to improve the short-term technical configuration. Another support lies at 0.8470 (12/06/2013 low).

"From a longer-term perspective, the underlying trend is positive."