Euro Sterling: Outlook tipped ever so slightly in favour of the EUR; we predict sticky trading ahead

The euro sterling exchange rate is 0.15 pct in the red at 0.8528 on Monday morning with the outlook for this currency pairing looking incredibly tough to call at this stage.

The gains for the euro to sterling pairing come amidst mixed market conditions: "It's classic risk on at the start of the European session: JPY is weaker, AUD, NZD are stronger while GBP, EUR and USD are mixed," point out Forex.com in a note to clients.

Nevertheless, a resumption of EUR strength is predicted to return. According to UniCredit Bank, the outlook is likely to favour the euro over sterling today:

"UK CBI reported sales are expected to have slightly declined in October and are likely to support the idea that cable may continue to have difficulties to rally much above 1.62 and will gradually retreat. In turn, EUR-GBP is expected to progressively bounce back above 0.86."

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Meanwhile, the team at UBS are opting to sit on the sidelines when it comes to EUR/GBP as the outlook is said to be hard to call at this stage. Nevertheless, when charged with sticking their neck out analysts do see the potential for higher moves: "The recent recovery tested resistance at 0.8551. A break through which would open 0.8603. Support is at 0.8493 ahead of 0.8431."

Over at ICN Financial, analysts say there exists the possibility for the GBP to advance against the EUR:

"The price has retested the 200-days SMA and was rejected from the 50 percent retracement level for the overall bearish wave as shown on chart. Accordingly, so long as 0.8550 resistance level is holding a bearish attempt will remain likely."

Euro Sterling stuck in a sideways range

One only needs to consider recent price action to realise how sticky this rate has become of late.

On Friday, the interesting data releases on both sides of the Channel, the IFO business sentiment in Germany and the Q3 GDP in the UK, were too close to expectations to give EUR/GBP direction. EUR/GBP changed hands in the 0.8520 area ahead of the publication of the UK Q3 GDP. There were some limited swings around its publication, but EUR/GBP returned soon to 0.8520 pivot.

"Match nil! Late in the session, EUR/GBP made a minor step higher, which might have been related to profit taking in cable that once more couldn’t stay above the 1.62 handle. EUR/GBP closed the session at 0.8538, modestly up from Thursday’s 0.8518 close, while cable ended at 1.6165, down from 1.6202 previously," says Piet Lammens at KBC Markets.