Euros to pounds: EUR/GBP forecasts see an approach of the 0.8000 downside barrier

By Will Peters

The forecast for the euro pound exchange rate remains negatively aligned, however the possibility of a corrective rally higher should not be ruled out.

The pound remains in favour, and although the solid Eurozone GDP reading failed to spark much reaction, Eurozone PMI figures could provide the euro with some momentum.

"Tomorrow, UK inflation will be released and will most likely trigger some movement in this rate. We have begun to see a bit of a sterling sell off and therefore we expect lower levels during today’s session," says a currency note issued by Caxton FX this morning.

Converting euros to pounds (EUR/GBP) shows a spot market rate of 0.8192. This is 0.2 pct higher than witnessed at Friday's close. The pound to euro exchange rate is thus at 1.2207.

Note: All EUR quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Euro pound exchange rate forecast

Those converting euros to pounds should note that it will be interesting to see whether the EUR/GBP 0.8168/60 support will be breached. This morning has already seen the rate bounce of this support level, analysts suggest a break will however open up the possibility of further declines.

ICN Financial give the following forecast on the euro pound exchange rate:

"The pair kick-started trading this week with more negativity, currently testing the critical short term support areas at 0.8160. A breakout below this level will push the pair further to the downside toward 0.8000 psychological barrier. For now, our weekly outlook is neutral to observe the pair at the critical 0.8160 support and 0.8195 resistance. Breaching the resistance will activate the previously favoured positive scenario with extended upside targets at 0.8560."

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Piet Lammens at KBC Market says that whatever the outcome of today’s price action, it might be an important week for sterling trading. There are several important eco data on the UK calendar later this week, with the inflation (tomorrow), the labour market data and the Minutes from the February BoE meeting (Wednesday) and the retail sales (Friday).These data will give an accurate update on the UK economic recovery.

"Some data (e.g. retail sales) are expected less buoyant than last month. Interesting to see whether this will slow the ascent of sterling," says Lammens.  

Euro exchange rates boosted by GDP data

The broader euro exchange rate complex remains well supported and this will further frustrate GBP bulls.

Eurozone Q4 GDP came in stronger than expected on Friday, and while EUR/USD has somewhat overshot 2y forward points, with Eurozone data broadly coming in better than expected, it is difficult to see a case for EUR downside.

Eurozone ‘flash’ PMIs will be the focus later this week. But for now we expect EUR/USD to remain well supported.

"A continued weak USD tone could see EUR/USD edge higher; the 1.3739 (Jan 24 high) looks likely to provide some initial resistance. On the downside, the 1.3620/40 area looks likely to provide good initial support," says a note issued by Lloyds Bank on the headline euro dollar pair.