Above: Lucy Lillicrap, FX Risk Management Consultant at AFEX. Image Credit: AFEX, Pound Sterling Live.

Quotes (4-5-17):British Pound to Euro exchange rate today: 1.1805, down 0.15% on the day's openEuro to Pound Sterling exchange rate today: 0.8472Fresh technical-based forecasts for the GBP/EUR conversion suggests recent strength is unlikely to be sustained.

Analyst Lucy Lillicrap at foreign exchange brokers Associated Foreign Exchange (AFEX) says of the Euro, “despite recent losses a broader positive pattern remains in force with re-emergent weakness here ultimately considered unsustainable.”

Lillicrap is a technical analyst who studies charts for patterns and indicators that give strong clues as to future direction.

This discipline looks to take away the day-to-day noise of events and fundamental drivers that can often distort the view of foreign exchange markets.

The AFEX call comes at as the Euro looks to retake the ground it lost against the British Pound during the course of April.

The month saw the Pound prove to be the best-performing currency in the G10 complex and those hoping for a better exchange rate will hope the trend can extend.

However, Lillicrap’s take on the outlook would suggest strength in the Pound to Euro exchange rate is likely to be short-lived in nature.

But, for the Pound to reverse trend Lillicrap argues a break below 1.1495 is probably still needed to argue renewed medium-term weakness is underway.

It is important to note that the analyst is looking at the exchange rate from a multi-week timeframe, so the call is not necessarily short-term:

The stakes are high for Sterling were such a break-down to occur as AFEX are targeting 1.0989 on such an eventuality.

But the Euro appears to be resistance to allow Pound Sterling above €1.20 and only an extension above distant 1.2345 resistance would reduce overall negative pressure.

Lillicrap believes fresh strength in Sterling-Euro “should prove relatively short-lived” as buying interest “wanes once again”.

Political Developments Underpin the Euro

"Political risk has abated, easing a headwind on the euro, with markets betting on centrist Emmanuel Macron winning France’s presidential runoff vote on May 7. Mr. Macron will faceoff with his far-right rival Marine Le Pen, who has designs of pulling France out of the euro and EU, in a debate Wednesday," says Joe Manimbo, an analyst with Western Union.

Manimbo warns the Euro could lose ground if the debate outcome results in a narrowing in Macron’s lead in opinion polls.

However Macron's leads is still at about 20% which in normal times would be unassailable.

Of course, the fear that the polls could be wrong will keep some nervous about bidding the Euro yet higher this week.

Also helping to prevent wider gains in the Euro was data offering a reminder of the bloc’s still-fragile economic health.

On May 2 Eurozone unemployment was reported unexpectedly steady at a still high 9.5 percent in March, compared to forecasts of a modest decline.

Sterling Retains Upside Momentum

Sterling rose toward seven-month highs against the US Dollar after stronger-than-expected U.K. data eased worry over growth moderating in the months ahead.

"Manufacturing growth unexpectedly accelerated and to the strongest in 3 years in March, showing how the weak Pound remains a boon for the factory sector, making U.K. goods more affordable on the global stage. The data offered hope that Thursday’s more influential services PMI could also surprise to the upside which would keep in the conversation the notion of an early U.K. interest rate hike from rock bottom lows," says Manimbo.

So all eyes turn to Thursdays Services PMI release for fresh guidance on the economic front.

However, it must be kept in mind that the Pound remains a political currency by nature and nothing matters more than upcoming elections in the country and the Brexit negotiations with Europe that follow.

Latest headlines confirm these negotiations are likely to be hard-fought with every day bringing with it some kind of fractious headline.

Mid-week we heard Theresa May accuse Brussels of "deliberately timed" threats aimed at impacting the country's election results.

May delivered an unexpectedly antagonistic speech outside No 10, urging voters to "give me your backing to fight for Britain".

"In the last few days, we have seen just how tough these talks are likely to be," she said, rejecting the idea that her guests had found her ill-prepared and unrealistic. "Britain’s negotiating position in Europe has been misrepresented in the continental press.

The EU and UK are at loggerheads over the size of the bill that must be paid by the UK when it leaves.

The UK is the EU's second-largest net-contributor so it is understandable that Brussels wants to ensure its future budget is not left with a large black hole.

Some on the UK side have suggested that the EU's unwillingness to not discuss a future trading relationship until this issue is settled is tantamount to blackmail.

That Sterling is staying above the fray at present does however confirm that current headlines amount to bluster - the real juice for currency markets will come when negotiations get underway and talk becomes official.