Pound to Euro Week Ahead Forecast: Favouring Resilience
- Written by: Gary Howes
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Pound sterling enters the new week with a constructive tone against the euro after extending its recovery trend.
The pound to euro exchange rate (GBP/EUR) trades at 1.1519 on Monday, having clawed back late-week losses to post another weekly gain.
That's a sixth consecutive weekly advance for sterling and the ninth rise in the past ten weeks. The turnaround is notable given the pair was on course for a decisive weekly loss as recently as Friday.
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Sterling found renewed support after UK PMI and retail sales data surprised positively, reversing bearish momentum and reinforcing confidence in the near-term growth outlook.
The PMI releases were particularly influential, with markets placing greater weight on the fresher survey data than on backward-looking official statistics from the ONS.
The run of stronger activity data has helped keep the broader uptrend intact, leaving sterling biased to the upside in the near term.
From a technical perspective, GBP/EUR has reclaimed its short-term moving averages, including the 9, 21, 50 and 100-day measures, signalling renewed underlying momentum.
However, the rally continues to face resistance from the 200-day exponential moving average near 1.1556, which has capped advances since early January.
A clear break above this level would be required to confirm a more durable upside extension, while repeated failures here risk another period of consolidation.
For now, the balance of risks favours further sterling resilience, provided incoming UK data continues to validate the improving momentum signalled by recent surveys.
Calendar-wise, it's a quiet week in the major economies, although there are some inflation numbers due from Germany that tee up expectations for the Eurozone inflation series next week.
The euro could find a bid if German data prints on the hotter side of expectations. However, expectations for European Central Bank interest rates are remarkably stable, meaning the German inflation figures will unlikely have a lasting impact on the market.
