Outlook for Pound vs Euro Exchange Rate: Further Sterling Appreciation Towards 1.20 Could Be a Slow Process

Another good day for the British Pound:

The Pound to Euro exchange rate is 0.22 pct higher on a daily basis; GBP/EUR is quoted at 1.1810 at 14:07.
The Euro to Pound exchange rate is thus at 0.8467.

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Short term gains forecasted: Euro / Pound Exchange Rate Breaks Long-Term Trend Line

After today's good data point Luc Luyet at MIG Bank says we have seen a fundamental shift in favour of the British Pound:

"EUR/GBP has broken its long-term rising trendline, confirming an increasing bearish momentum. The support at 0.8470 (12/06/2013 low) is challenged. An hourly resistance stands at 0.8553 (30/08/2013 high).

"As long as prices remain below the resistance at 0.8652, the technical configuration since the annual high at 0.8815 is viewed as a part of a larger corrective phase which should eventually decline towards the 0.8411-0.8398 (26/04/2013 low) region and possibly even lower."

Shaun Osborne at TD Securities says, "The EUR continues grinding lower, and the break below some key support in EUR/GBP (200-day moving average at 0.8483) has added to the broad weight on the Single currency."

Boris Schlossberg at BK Asset Management says traders are targeting further gains for the GBP:

"Cable rose to a high of 1.5606 in the aftermath of the release, but has since dropped back into the 5570's as focus turned to geopolitical news. Still the pair remains well supported at the 1.5500 level and has performed very well against the euro with some traders now targeting 0.8400 in EUR/GBP (GBP/EUR @ 1.19) as UK growth begins to exceed Eurozone's."

Pound Euro Exchange Rate Gains Harder to Come by

However, Piet Lammens at KBC Markets warns that further Sterling gains against the Euro could be harder to come by:

"EUR/GBP has incorporated the recent improvement in the UK eco data. Even so, we think that the downside in sterling has become well-protected.

"The pair is drifting further south in a broad sideways consolidation pattern between 0.8800 and 0.8400. The easiest part of the sterling gains against the euro might be over. The sterling rebound might shift into a lower gear."

The Euro loses ground despite good data

Ipek Ozkardeskaya at Swissquote has meanwhile noted that the Euro has been unable to gain traction despite some decent fundamental data from the Eurozone:

"Euro losses ground despite improving economic data in the Euro-zone, the latest in focus being the manufacturing PMI. Indeed, the final data confirmed the expansion of Euro-zone’s manufacturing activity in August as the PMI advanced to its highest since 26 months.

"However, the unemployment remains at its record high level of 12.10% and the disinflationary pressures continue with persistently slowing growth in consumer prices.

"While the Greece is suspected to not be able to service its debt in fall, the need for a third bailout is suspected to exceed EUR 10bn estimated recently by the IMF.

"The German elections are due on September 22th, and to gather support and increase popularity, the current Chancellor Merkel does not refrain from saying that Greece should have never been allowed into EUR.

"According to Eurostat, the unemployment rate in Greece is at 62.90% for people under 25 years old, while German manufacturing PMI recorded a slight decline in August."