The pound to euro exchange rate has had second half to the week; GBP to EUR is nearly a percent in the red at 1.2073. It is alarming to note that we are talking about the 1.2 level once more - we could very well see a test of this psychologically important number next week. But, never fear say RBS who see GBP recovering in 2013: "Looking ahead, developments in the Eurozone debt crisis will be as important as ever. This week European Commission President Barrosso declared that the “existential threat against the euro has essentially been overcome�. "We beg to differ. Accordingly we are forecasting a weaker euro in 2013. Choosing the precise timing of the next Eurozone flare up is difficult, but we expect GBP/EUR to return to mid 2012 highs as we move through the year." Sterling appreciated against the euro over the first half of 2012, with GBP/EUR peaking at 1.29 as the Eurozone crisis intensified. But the pound’s progress was checked and partly reversed as ECB President Draghi pledged to do “whatever it takes� to keep the single currency intact. GBP/EUR closed the year just marginally higher it started it, at 1.23. Deutsche Bank say 2013 won't favour sterling We have today published a story covering a rather interest piece of currency market analysis conducted by Deutshce Bank FX strategist George Saravelos.The article can be read here. For those who want to cut to the chase, Saravelos is bearish sterling: "We think there is a risk these inflows reverse, on the back of UK downgrade risks and ongoing exceptionally poor macro performance. Combined with the risk of a building policy premium to build into the Carney BoE leadership transition, the very poor quality of UK inflows is one of the main reasons behind our core bearish view for sterling this year: buy EUR/GBP and sell GBP/USD."

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