ENM: Euro pound exchange rate dictated by external events: Your sterling outlook for next week
The euro pound exchange rate has reversed sharply today as the euro's curious resilience in the face of deteriorating market conditions finally gives way.
The EUR/GBP pair is seen 0.3 pct in the red at 0.8030 at 13:00 in London.
Turning to the outlook for the euro pound rate, "GBP-USD and EUR-GBP will likely be driven by global risk factors rather than by events at home," says a note from analysts at UniCredit.
Data releases this week reaffirmed a bleak picture for the UK economy and Moody’s also warned that Britain could lose its AAA status in the event of a new recession.
Moreover, the new BoE Inflation Report offered no major hints as to the bank’s future intentions, although Governor King tried to talk sterling down, saying that it will be hard for the UK to grow fast without a further fall in the real exchange rate and that he has not yet lost faith in the asset purchase program.
UniCredit say:
"Both cable and EUR-GBP are thus expected to continue to reflect mostly swings in global risk aversion and the EMU debate next week, as the UK calendar will include only the latest BoE minutes, which will come just after the Inflation Report and CBI Industrial Trends.
"As a result, more selling pressure could emerge for cable towards 1.5775 on a break below 1.5830, while a rebound back above 1.5950-70 is still needed to reverse the pair’s current bearish tone.
"In turn, EUR-GBP is likely to show its usual smoother trajectory, but might retest the upper bound of the 0.8050-0.8125 band if Greece receives new funds."
