Pound Sterling fell sharply against the Euro ahead of the weekend amidst a broad-based rally in the European currency.

The Pound to Euro exchange rate will now start the new week at 1.1421, down 0.57% on the day’s opening level and having gone as high as 1.1501 at one stage.

There was no immediate sign of any Sterling-related reason for the sell-off, indeed by most accounts the UK currency appears to be within recent ranges against most majors.

Rather, the culprit appears to be the Euro which according to one analyst “got its groove back” after slower U.S. hiring inspired a fresh round of Dollar selling.

“The Euro earlier in the week had its gains checked after Eurozone inflation slowed more than expected, suggesting less scope for the ECB next week to sound a hawkish note,” says Joe Manimbo, an analyst with Western Union.

Key for the Euro going forward will be the extent to which officials signal a chance of reducing stimulus in the months ahead.

The ECB meet on Thursday and traders will be eager to hear whether a sea-change in policy lies ahead.

“Failure to open the door to reduced stimulus this year would leave the Euro ripe for a corrective move lower,” warns Manimbo.

Should such an outcome coincide with a strong Conservative victory in the Thursday vote we could well see the GBP/EUR race higher.

Analysts at Nordea Markets tell us that the exchange rate could go as high as 1.16 on such an outcome.

“In case of a solid Conservative victory where the party’s majority in parliament remains intact, we would expect the risk premium on EUR/GBP to be scaled back,” says Andreas Steno Larsen at Nordea Markets. “A short-term correction towards at least 0.86 is on the cards no matter the size of the potential Conservative majority,” says Larsen.

EUR/GBP at 0.86 translates into GBP/EUR at 1.1628. If this is a rate you are looking to secure I would suggest you contact a FX specialist to book this rate automatically when achieved.

Rate Could go Down to Parity

Pound Sterling Live last week today reported that analysts at HSBC continue to expect the Pound to achieve an exchange rate as low as 1:1.

"Once this election is over, we expect GBP to succumb to downside political, structural and cyclical drivers," says HSBC analyst David Bloom.

This decline is expected to occur before the end of 2017 with Bloom saying the GBP's fall is not yet done as a fraught Brexit negotiation process will test the currency.

As time drifts by, if little evidence of progress in the talks emerge, the market will have to contemplate the substantial possibility of a “no deal” scenario.

The economy is also an issue.

"The renewed widening in the trade deficit is a recurring headache that requires more adjustment lower in GBP," says Bloom. "There are some signs that the economy is losing traction, notably through slower consumer spending that has driven GDP growth lower."

HSBC believe this recent rally is most likely to have marked the 2017 high for GBP/USD at around 1.30.

Theye continue to believe GBP/USD will weaken back to 1.20 and EUR/GBP will move to parity by the end of 2017 "on the back of political, structural and cyclical pressures."