Photo by: Sanziana Perju / ECB.
Pound Sterling has retreated from recent highs against the Euro and could be set for a period of consolidation. Those looking to buy euros should cover some exposure at these levels with a competitive currency provider, says one market professional.
Pound Sterling is 2024's best performing major currency, having been spurred on by the expectation that the UK's interest rates would remain above those of other major economies for some time.
However, the rally higher has stalled as a technical resistance at 1.19 combines with weaker global stock markets to push GBP/EUR back below 1.19.
"Our clients are asking if that's it," says Louisa Ballard, Director at Horizon Currency. "A Pound-Euro rate above 1.19 looks like a stretch for now, but we are still looking at great rates from a historical perspective: We last saw these levels in late July, and before that, we had to go back to 2022."
"If you would like to talk about the market, please WhatsApp me at this link," she adds.
Ballard says Horizon Currency can offer the best euro exchange rate for payments, with third-party analysis showing Horizon can beat Revolut on large payments and will match Wise's fee. "The added bonus is we give personal support," says Ballard.
Regarding the near-term outlook for the Pound, 1.19 has emerged as a clear source of technical resistance that has stalled the August rebound. Those regular readers of Pound Sterling Live will be aware that the pullback to 1.1865 was predicted in our latest Week Ahead Forecast.
We think the pullback can extend further if U.S. data due out Thursday and Friday disappoints. This is because the Pound-Euro and Pound-Dollar pairings are highly sensitive to global investor demand.
If the data disappoints, it could trigger a stock market retreat that is then reflected in weaker purchasing power.
That said, the broader trend for the Pound still remains higher, and a break above 1.19 in GBP/EUR remains possible in Autumn.
"The UK is rebounding from last year’s technical recession and services inflation remains sticky. The Bank of England could cut less than its peers and soon offer the highest rates in the G10," says David Alexander Meier, an analyst with private bank Julius Baer in Zurich.
As global investors tend to send their money where returns are higher, the Pound can benefit as inflows into UK interest rate-based assets stay elevated. This is particularly relevant for the Pound to Euro exchange rate, as the UK's interest rates are set to remain notably higher than those in the Eurozone.
"UK interest rates have peaked, but rate differentials with European peers will widen, benefiting the GBP," says Meier.
And it won't be until 2025 that the Pound comes under pressure, according to the Julius Baer analyst. "Longer term, structural issues and fiscal headwinds suggest that the best of the recovery is over."