The last week was pretty fruitful for sterling sellers as we saw the GBP/EUR exchange rate hit highs of 1.18; Unfortunately, we saw that the pound was unable to break a key resistance level of 1.1808 after 9 attempts and subsequently dropped back to the low 1.17's- leading us to close on Friday at 1.1760.
The next 7 days will be speculation filled with the Italian Referendum coming up on Sunday, and the Supreme Court decision on Brexit beginning on Monday 5th December. With a "No" vote leading in the polls in Italy at the moment, we are expecting the euro to weaken before the market closes for the weekend on Friday- with the referendum results being released on Sunday, traders won't want to risk their positions over the weekend.
The reason why we are expecting so much weakness in the euro is the fact that a "No" vote will almost instantly trigger another election in Italy which could lead to Italy also exiting the euro- and as we have seen what effects that had in the UK, traders are now extremely wary of what could be up ahead.
Due to the Supreme Court decision on Monday, it is unclear whether traders will choose to buy into the pound which would push the GBP/EUR up, as this decision also carries a lot of risks. Many are finding it highly unlikely that the Supreme Court will overturn the decision for the UK PM Theresa May to have to consult MP's before triggering Article 50, however, we have seen so many shocks this year it is wiser to stay out of the pound until we see a decision.
There is a possibility this week that we could see the GBP/EUR approach 1.20 prior to the referendum; what happens afterwards, unfortunately completely depends on the results in Italy and the UK next week. I would personally suggest being extremely vigilant this week when trading the markets as we are likely to see very sharp moves as we saw with the UK Referendum and the U.S. election.
Apart from politics, there are some key data releases this week that could have an effect on the pound, the first being Consumer Confidence on Wednesday- we have seen this rebound to "Pre-Brexit" levels recently so I am expecting strong figures again this month. The next piece of economic data to watch out for will be PMI Manufacturing for the UK on Thursday, again I am expecting to see strong figures as the weak pound has been helping the exporting side of the UK economy- if we do see the data come out as expected it is fair to assume that the pound should strengthen following these releases.