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GOOD MORNING FROM EURO FX


Pound-to-Euro X-Rate Week Ahead: Rebounds Likely to be Short-Lived


A rebound might be possible this week, but ultimately strength will have its limits





Since mid-April the Pound-to-Euro exchange rate has been in decline after the highs towards 1.16 were rejected amidst a slew of underwhelming UK data and indications the Bank of England would delay raising interest rates until later in the year.

The result is Pound Sterling and the Euro are back in the midst of a long-term sideways-orientated range, defined by 1.15 at the top, and 1.11 at the bottom.

We would suggest, based on the look-and-feel of the charts that the exchange rate is moving towards the bottom of this longer-term channel, the move defined by an interim shorter-term sloping channel forming from the April highs.

From a technical perspective, we would say therefore the bias for the week ahead would have to be to the downside if pressed for a directional view.


There is a chance of a move towards the top of the downward-sloping channel, shown in the above graphic; we would certainly not discount the possibility of some strength over coming days, particularly given the strong sell-off of late which might be due a correction.

However, the important point to observe is that any strength is liable to be temporary in nature.

A break-out in favour of a stronger Pound Sterling will ultimately be data-dependent and only when markets see unequivocal signs that the British economy is waking from its first-quarter slumber would we be confident enough to say markets might be willing to retest 2018 highs.

Until then, technical considerations will likely be key.


TODAYS RATES AT EURO FX

EURO = 0.865

STG = 1.11

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