GBP/EUR exchange rate (GBP/EUR) lurking underneath 1.19, analysts predict a breach of this level, but beware a EUR revenge rally

A look at the foreign currency markets on Friday morning shows:

• The Pound Sterling to Euro exchange rate is 0.1 pct up on Thursday night's closing rate; GBP/EUR is quoted at 1.1898 at 11:25.
• The Euro to Pound Sterling exchange rate is at 0.8408.

Please be aware that the above quotes are wholesale; your bank will charge a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please find out more here.

"Last session sterling had a taste of victory above the 1.19 level, although it wasn’t long before the euro pulled the GBPEUR rate back down to 1.18. Poor eurozone industrial production figures have contributed to the higher rate," says Sasha Nugent at Caxton FX.

Nugent says that with little to drive the GBP/EUR rate, sideways movement is probable today with the pound still targeting a close above 1.19.

Euro could yet take revenge

We hear form Gareth Berry at UBS who today warns GBP bulls that the EUR could be poised for a recovery:

"Having tested the strong support at 0.8397, the immediate risk appears for a short-term recovery to unwind the sharp sell-off. Resistance is at 0.8486. Support is at 0.8383 ahead of 0.8285."

A break lower for the Euro imminent

Whether or not a short-term relief rally is due remains open to question. We can however not ignore the strong consensus that continues to favour further GBP gains over the EUR.

Kathy Lien tells us here that "84 cents (1.19 in GBP to EUR) is a very important support level for EUR/GBP that we expect to be broken in the medium term with a potential move down to 82 cents for the pair.  If Carney remains dovish, we would view that as an opportunity to sell EUR/GBP at a higher level."

ICN Financial Markets say:

"For the whole week, the pair has been trading within a 50-pip narrow range, pushing towards the key neckline for the double top pattern at 0.8400, a break below the level seems imminent, however we prefer waiting for a decisive break and stability below it to confirm further downside."

Pound Sterling retains broad-based favour

The wider picture continues to favour the Pound Sterling against the majority of other major currencies.

David Madden at IG explains:

"Due to the labour market moving in the right direction, and the Bank of England being more likely to reduce the quantitative easing programme, traders have bought the pound versus the US dollar.

"The £375 billion per month bond buying scheme is paying dividends, evidenced by the latest manufacturing, retail and construction purchasing manufacturing index data, which has shown all these sectors are growing at a faster rate than before. If UK economic data continues to improve, sterling could continue to gain ground versus the dollar."