Pound to Euro Week Ahead Forecast: Roxette Sings “Listen to Your Heart”

Image © Adobe Images

The Pound to Euro exchange rate opened the new week near fortnight highs and could have scope to climb further to around 1.18 in the days ahead, as Roxette sings “Listen to Your Heart,” and Sterling makes a start on a journey that might ultimately see it back around 1.20 over the coming months.

GBP/EUR recovered to multi-week highs around 1.17 last week as EUR/USD receded from some of its best levels since November 2021 and with the latter pair perhaps set to take a further dip into the market’s very own Pool of Bethesda, Sterling may have scope to rise further toward 1.18 up ahead.

“We are also introducing changes in some of our other forecasts. More specifically, we are bringing our EURGBP forecasts marginally higher, reflecting the stronger EUR, without, however, changing our bullish GBP view directionally,” says the research team at Barclays, in a Sunday note.

“We have recommended longs in GBPCHF as a way to capture a further normalisation in the VIX with limited downside risk due to more-active SNB pushback on CHF appreciation,” they add, after lowering their second-quarter GBP/EUR forecast slightly, to 1.19.

The anticipation of an eventual climb toward 1.20 assumes a continued, gradual and orderly decline of the US Dollar that would help to lift EUR/USD to 1.20 over the next three-to-six months, and GBP/USD back to around 1.44.

Above: GBP/EUR shown at daily intervals with Fibonacci retracements highlighting possible resistances. Click image for closer inspection.

“Given that some BoE hawks [have talked] of trade dumping as being potentially disinflationary we would be mindful of a graduated uptick in June MPC pricing, from the current 11bps,” ”says Jeremy Stretch European head of FX strategy at CIBC Capital Markets.

“Despite the immediate retail beat we would maintain a cautious EUR/GBP upside bias, only a weekly close below 0.8519 [above 1.1798 in GBP/EUR} would negate looking for a return towards the 21 April high,” he adds in a Friday note to clients.

There is no meaningful data out in the UK or Euro Area this week, however, Sterling showed resilience last week when the S&P Global Composite PMI survey index fell sharply for April, to a level sometimes consistent with recession.

The above is admittedly a wild forecast, and somewhat contrary to popular opinion so in entertaining it, readers might like to just "Listen to your Heart," as that's what the biblical covenant says to do.  

Above: Roxette, Listen to Your Heart. Source: Youtube. 

Meanwhile, the euro was supported by a better-than-expected German Ifo survey suggesting an improvement in confidence among small businesses, and some favourable comments from European Central Bank officials.

“We raise our GBPUSD forecast and now see the pairing edging higher towards 1.39 at the end of our forecast horizon,” strategists at UBS say, in a Friday note.

“With US policy risks persisting and European fundamentals improving, EURUSD is likely to remain supported, with the balance of risks favoring further euro strength,” they add.

The outlook is largely a function of how Sterling and the Euro each trade against the Dollar, which was tipped by the UBS team on Friday to help lift EUR/USD to 1.18, implying they think GBP/EUR will likely trade around 1.1779 over the coming year.

Bonus Song: Florence and the Machine Rabbit Heart. Source: Youtube.