British Pound to Euro Exchange Rate: Prepare for Another Big Drop Forecasts AFEX's Lillicrap

Hammond influence exchange rates

Above: Chancellor Hammond has been in the Brexit headlines at the start of the new week

GBP could be due another big fall against the Euro soon and any strength should be viewed as temporary says a noted technical analyst.

  • Pound to Euro exchange rate today: 1.1110
  • Euro to Pound Sterling exchange rate today: 0.9003

Sterling has edged higher against both the Euro and Dollar over the past 24 hours with signs that the sell-off may be getting exhausted. 

While the relief will be welcomed by those with GBP payments, we would warn against becoming too complacent.

Lucy Lillicrap a researcher at AFEX, a London-based foreign exchange brokerage, says we shouldn't yet

read too much into any bouts of GBP strength.

The technical analyst has updated clients telling them that while the GBP/EUR is seen bottoming around 1.0950 prices, the stability should only be temporary.

“There have yet to rally in anything other than a corrective manner and indeed further (significant) losses remain readable going forward,” says the analysts in a warning to those who are holding out for a more substantial bounce in Sterling.

GBP to EUR exchange rate

Lillicrap says that immediate stability owes more to prior oversold readings than an attempt to bottom out and while values could continue to track sideways for several more days risk still exists for another sell-off thereafter.

“Technical studies argue a rally back through 1.1250 is needed to reduce negative pressure and otherwise 1.0850/1.0750 are targeted in due course,” says Lillicrap.

Soft Start to the New Week

Sterling trades above recent lows but it is hardly an inspiring start to the new week for those hoping for a stronger Pound.

The currency has softened amidst an environment of Euro strength.

The Euro is undergoing a bounce against the US Dollar having ended the previous week as the worst-performing G10 currency.

The bounce in EUR/USD is sucking the EUR/GBP higher in its wake.

Sentiment towards Sterling is also poor amidst the ongoing negative headline flow concerning Brexit.

(Is any headline about Brexit ever positive anyway?)

Regardless, news of a potential spat between Chancellor Hammond and the more headline Brexiteers in cabinet has failed to inspire the confidence Sterling needs to bounce.

Watch Hammond’s appearance before the Treasury Select Committee on Wednesday and May’s appearance at the European Union summit on Thursday and Friday.

Note there is also data to consider over coming days.

Will the U.K. economy offer a respite this week for the Brexit battered Pound?

Watch inflation data due on Tuesday, and retail sales on Thursday to show improvement.

A midweek survey of unemployment is forecast to steady at 4.9 percent. A reminder of the economy’s resilient shape could spark some short-covering buying of the Pound.