GBP/EUR Exchange Rate Maximum Forecast in 1.1340/50 Area but Strong Buying Interest Seen at 1.10

We are told Pound Sterling's recent period of appreciation against the Euro remains corrective in nature and we believe the next big move lower could be triggered by a looming Government response to the previous week's Article 50 court ruling.

• Pound to Euro exchange rate today: 1.1200
• Month's best exchange rate: 1.1290
• Euro to Pound Sterling exchange rate today: 0.8930
• Month's best exchange rate: 0.9049

The recent move higher in Pound Sterling has understandably generated much excitement amongst those looking for higher transaction levels.

The excitement is understandable in the context that it was actually one year ago that this great period of Sterling depreciation actually began.

Those with international Sterling payments have lost value over the course of every month since.

So one year on, and can we expect the start of a trend higher?

"While little evidence exists to suggest a long term low is in place already GBP values here, as elsewhere, are nonetheless retracing higher for the moment to unwind their previous oversold condition," says analyst Lucy Lillicrap at AFEX, a foreign exchange brokerage in London.

Lillicrap cites regular layers of resistance as likely to limit advances beyond 1.1500 going forward. 

"Indeed, given a lack of base work, prices might struggle much above even local 1.1340/50 area resistance," says Lillicrap.

However for now Lillicrap says at least the psychological 1.10 level is evidently being protected as well, by demand at 1.1050, and some buying interest now also exists around 1.1125.

Analyst Bill McNamara at brokers Charles Stanley is also eyeing 1.10 to provide further support.

"The UK currency has also been recovering relative to the euro and last week’s 2.9% gain strongly suggests that it found support at its multi-year lows, i.e. at 1.10 or so," says McNamara in a weekly forecast note to clients.

Its latest price action has also lifted it back above its short-term downtrend and McNamara believes the chart is indicating that there is still room for further near-term upside – although it is unlikely that we have seen the last of the volatility.

Latest Pound/Euro Exchange Rates

	Live: 1.1449▲ + 0.05% 12 Month Best: 1.2162
*Your Bank's Retail Rate	1.106 - 1.1106
**Independent Specialist	1.1289 - 1.1335 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Article 50 Debate Threatens to Destabilise Sterling

A soft start to the week for GBP as the mechanisations of the Government’s response to the previous week’s High Court decision are revealed.

The High Court ruled that only Parliament can trigger Article 50 of the Lisbon Treaty.

The news helped the British Pound trade to multi-week highs as markets see the hand of Parliament drastically watering down the severity of the looming Brexit.

The Government’s answer to the court ruling is an appeal which it hopes to win - "what I have been clear about, and the government has been clear about, is that the focus of the work is on this Supreme Court hearing,” said a Government spokesperson on Monday November 7th.

However, if the challenge fails, the BBC reports the Government may actually only seek a Parliamentary resolution on the topic as opposed to pushing through an actual bill which is liable to slow the entire process down yet further.

A resolution could sail through Parliament in an afternoon as no members are able to temper with the contents of what is put before them.

If this report is confirmed we would imagine it to be negative for Pound Sterling as it almost completely waters down the benefits cited by markets as being inherent in Parliament having a say on Brexit negotiations.

We have today seen the Pound fall from previous highs with the Pound to Dollar exchange rate trading down to 1.1223 and the Pound to Dollar exchange rate trade at 1.2410.

A resolution would however most likely face fierce opposition and fresh legal challenges as it does not fit the spirit of the High Court's Article 50 ruling which explicitly called for legislation to be passed by Parliament on the matter.

However, Brexit Secretary David Davis has this afternoon told Parliament that primary legislation would have to be deployed.

Primary legislation could take at least six weeks to clear both Houses of Parliament and is also subject to amendments, which gives MPs and Lords huge scope to change the tenor of the bill.

It is what opposition MPs will be keen to see as it allows them more influence over the procedure and demands for full access to the single market and customs union will be high on the agenda.

The Government's final decision on the shape of the instrument could well determine GBP direction - however, the timing on all this is clearly impossible to forsee at this stage.