Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Pound to Euro Week Ahead Forecast: Potential Downside After A Tear Higher

Published Dec 04, 2023 06:59 Updated Dec 04, 2023 07:11
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Pound to Euro Week Ahead Forecast: Potential Downside After A Tear Higher
 
EUR/GBP
-0.16%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

PoundSterlingLIVE -

  • The short-term targets to watch
  • GBPEUR looking overbought near-term
  • No UK or Eurozone calendar events this week

Pound Sterling enters the new week with the benefit of two solid consecutive weekly advances against the Euro, which confers a degree of momentum in a calendar-light week.

Sterling has recorded two +0.90% weekly advances against the Euro, registering a peak at 1.1660 last Friday, but we are told the Pound to Euro exchange rate now looks overbought, and the coming week could see some paring of the recent advance.

"Since it posted a seven-month low of 1.1411 a fortnight ago, sterling has been on a tear relative to the single currency," says Bill McNamara at The Technical Trader. "In the space of just ten sessions, it has surged by 2.12%."

He adds that this makes for the strongest short-term push in almost fifteen months.

McNamara says there is perhaps scope for further upside for Sterling, although not, perhaps, in the short term.

"Its latest price action has left it looking overbought on most technical measures and some consolidation might not be too far away," he explains.

Although the coming days could see Pound-Euro consolidate to correct an overbought market, the setup is, on the whole, still supportive of the Pound.

The Pound has gained after interest rate expectations in the UK and Eurozone diverged meaningfully over the recent days.

In the UK, markets are paring expectations for the quantum of rate cuts due to be delivered in 2024; in the Eurozone, these rate cut bets are growing.

This divergence has widened the spread between the yield of UK bonds and those of Eurozone bonds, creating an uplift in the Pound-Euro rate.

UK survey data points to the UK economy picking up momentum in November, while the Euro was undermined by the sharper-than-expected decline in Eurozone inflation reported last Thursday.

The Eurozone inflation data encouraged markets to raise bets for the amount of interest rate cuts to come from the ECB in 2024, with a May cut now seen as a likely kick-off date.

By contrast, according to market pricing, the Bank of England is only likely to make its first cut later in the summer.

The Bank of England appears to have successfully pushed back against rate cut bets, with the MPC's Bailey, Pill, Haskel, Ramsden and Greene all saying recently they believe rates will stay at 5.25% for an extended period.

This makes for a large coalition of Monetary Policy Committee members willing to strike a 'hawkish' tone at the Bank of England's December policy update.

"Sentiment has undergone a sea-change of sorts as traders have reacted to the ‘higher-for-longer’ rhetoric coming out of the Bank of England, and the concomitant expectation that UK base rates might well remain at 5.25% through 2024," says McNamara.

"Looking further ahead, however, a challenge of the year's peak, at 1.1743, looks entirely possible," he adds.

An original version of this article can be viewed at Pound Sterling Live

Pound to Euro Week Ahead Forecast: Potential Downside After A Tear Higher
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email