Pound euro exchange rate: Does GBP/EUR at current levels offer a buying opportunity?

As we approach today's all-important Bank of England Quarterly Inflation Report release and ensuing press conference we see the pound to euro exchange rate has gained 0.22 pct on last night's close to reach 1.1865.

(All quotes are taken from the wholesale spot markets; your bank will subtract a spread at their discretion when delivering a retail rate. But, an independent FX provider will guarantee to undercut your bank's offer, thus delivering up to 5% more currency. Please learn more here.)

The British pound to euro exchange rate had initially been on course for a test of 1.18, this decline was arrested by news that the ILO Unemployment Rate had dipped to 7.6%. The Bank of England is targeting unemployment at 7% before considering hiking interest rates.

Is this a buying opportunity for GBP against EUR?

We expect a great deal of volatility through the remained of today; particularly at the bottom of the hour with the Quarterly Inflation report release.

However, looking beyond the short-term noise we note that the outlook remains broadly GBP positive.

It is with this in mind that we hear from Lloyds Bank Research who reckon that the GBP will likely win out against the Euro, particularly with unemployment rate going down:

"Forward guidance means that the ILO unemployment rate is now the single most important UK number, and the market is expecting the September data to show a drop in the rate to 7.6%, edging closer to the 7% threshold. If the numbers are at or below market expectations, it should set a positive tone for GBP, while if the rate fails to drop recent GBP weakness can be expected to extend.  

"In reality, it remains hard to justify EUR/GBP being at levels above those seen before the ECB rate cut, but the current market tone is seeing general weakness in the higher beta currencies, and as long as this is the case, it will be hard for GBP to rally. Even so, UK data remains objectively strong, and yesterday’s drop in inflation is of little real consequence for MPC policy, so the current dip in GBP should be seen as a medium term buying opportunity."

No doubt, the path for further gains in GBP will be winding. However; momentum in the economy is certainly more positive than that in the Eurozone, hence a break of 1.2 should surely be on the cards.