GBP to EUR continues to hover around 1.2, what will it take to push the exchange rate yet further

Monday, 05 March 2012 14:08

The GBP to EUR exchange rate is currently 0.05% lower on last week's close, the exchange rate is sitting at 11995 at 14:05 GMT.

The GBP continues to hover at the 1.2 level and one wonders what it will take for the exchange rate to make a firm break away from this level.

If we look at the technicals, we see the "EUR-GBP caught the low almost to the pip on Friday and that continues to be an important level, the longer term picture still points for further downside although the shorter term still needs to break below the 0.8315/0.8280 levels for that to pick up pace," says William Moore at RBS.

Intraday, Moore favours the range trade to the metrics as outlined above. Top side important levels lie at 0.8372 and 0.8493,
key longer term support at 0.8223.

"Had this not been a daily piece I’d be recommending longer term shorts with stop losses through 0.8520 targeting 0.8286
onto 0.8192 onto 0.8069 as that represents pretty good risk/return here. For the short term use the 0.8429 level as a good
fade level intraday and 0.8315 should provide some support," says Moore. 

Elsewhere, Chris Towner, director of FX advisory services at currency specialist HiFX, comments on the impact of Putin’s re-election and the future of the rouble

"Despite the concerns about voting transparency Putin has returned to power in Russia.  So far this year the Russian rouble has had a good run, strengthening from levels above 50 rouble to one Pound to briefly test below 46.00 last week.

"It has been the global economy though rather than politics that have been driving the rouble and its strength is down to the stabilisation that we have seen in the European sovereign debt crisis. On top of this it is the high yielding commodity currencies which are sought by investors in times of risk aggression and the rouble is one of these with its current 8% yield.

"Inflation, although stubbornly high, is expected to remain below 10% this year and high oil prices have certainly helped improve the prospects for the Russian economy and indeed the Government’s revenues. Health reform and military spending are on Putin’s to do list now and he is expected to flex his muscles both on the domestic front as well as on the international front.

"However after the euphoric start to 2012, his re-election comes at a point when financial markets are questioning the longevity of the current good feel in the global markets and we all know how sensitive the rouble can be to financial nervousness."