Pound to euro exchange rate heads lower, but the outlook for GBP to EUR remains positive

Last Updated on Monday, 09 January 2012 10:30 Written by Sam Coventry Monday, 09 January 2012 10:28

The pound dollar exchange rate could, meanwhile, break out of its current trading range and head lower.

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The pound to euro exchange rate is 0.28% lower on the day, GBP to EUR is at 1.2089.

The pound to dollar exchange rate is 0.17% higher, GBP to USD is 1.5451.

Having climbed by over a cent last week, pound euro continues to edge higher as the eurozone’s weak growth outlook heightens concerns.

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"Despite some better than expected UK services and construction figures last week, sterling is not making the current gains over the euro down to a change in sentiment towards the domestic economy. It is intensifying concerns surrounding the eurozone’s growth and debt that is the key driver here. Further data releases and bond auctions this week provides further scope for euro losses," says a morning comment on the GBP EUR rate from Caxton Fx.

Caxton say that the outlook remains pretty bright for this pair.

It is a sparser week in terms of UK data, which means the focus will be on the eurozone more than ever, which judging by last week isn’t a positive thing for the single currency.

Looking at the pound dollar rate we see that sterling found it tough going against the USD last week, but is benefiting from support at these multi-month lows.

"Current levels close to $1.54 broadly represent the bottom of a trading range that has been in place for several months. UK gilts were the top performing government bonds in 2011 and this has given sterling plenty of support, even against the stronger US dollar. However, not even this factor was able to guard against a two cent weekly decline for this pair. The US recovery is really picking up some pace now," say Caxton.

The US dollar is the pick of the currencies at present, and with the US economy outperforming the UK, we may see this pair break its trading range to the downside.