- Technical studies suggest 1.14 is the touchstone for GBP/EUR

- Sterling will be subject to EU summit outcome on Brexit

- EU summit also key for the Euro re. Merkel's need for agreement on asylum seekers

Above: Theresa May and European Council President Donald Tusk. Image © Number 10 Downing Street

The Pound starts the new week softer against the Euro, with £1 buying €1.1357, having opened the day at 1.1372.

This price action will be disappointing to those looking for a stronger Sterling and that the currency failed to push higher towards the 1.15 level against the Euro in the wake of what was a pro-Sterling Bank of England event on Thursday, June 21 is very telling from a strictly technical point of view.

The weakness confirms to us that this exchange rate is highly likely to oscillate around the 1.14 level over coming days.

The Bank of England signalled it has an appetite to raise interest rates in either August or November at its June policy meeting; a revelation that saw the currency move sharply higher on the day. We, and an host of strategists, saw the potential for the exchange rate to move higher and towards the top of its longer-term range at 1.15 on the back of the positive impulse.

Of course, this could yet be the case but the failure of GBP/EUR to capitalise on the gift granted by the Bank of England suggests this is a very sticky market and both gains and losses are liable to remain contained.

This is good news for those businesses and individuals who crave stability; but it's bad news for those who are looking for a sudden increase in buying power - be it by either the Euro or Sterling, in the near-term.

"Given the risk factors in play – which include swings in Brexit sentiment, fluctuating Bank of England and European Central Bank policy expectations and political instability in Spain, Italy, and Germany – it is perhaps remarkable that GBP/EUR has remained within its 1.1070 to 1.1540 medium-term range," says Gajan Mahadevan a Quantitative Strategist with Lloyds Bank.

GBP/EUR volatility is low, and "this may be an indication that markets believe ‘status quo’ conditions are likely to persist," says Mahadevan.

We continue to watch for swings around 1.14 over coming days.

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The Pound's Week Ahead: EU Summit

Brexit is front and centre for Sterling in the coming week with the European Council set to meet on June 28-29. Brexit will be discussed on Friday, June 29 from 08:00 B.S.T onwards, so look for headlines concerning the matter to be delivered throughout the day.

We have seen over recent days a further ramping up of Brexit headlines ahead of the summit, with both sides engaged in jockeying, but, remarkably the Pound has hardly moved on the headlines.

Markets are simply looking for concrete outcomes that give a clear view on what the future will look like. Perhaps this week we will get such outcomes.

On the data and domestic events calendar, watch Governor Mark Carney set to make a speech on the morning of Wednesday, June 27. The Bank of England proved to be a big mover of Sterling in the week past as the message to expect higher interest rates over coming months was telegraphed and markets will be looking out for any further information concerning policy matters. We can't however at this stage say whether this scheduled speech will touch on monetary policy.

Data is all second-tier in nature with a revision to Q1 GDP being tipped for Friday. Markets are looking for the 0.1% growth that was initially reported to be confirmed by the ONS.

With the EU summit due on the same day we are confident in suggesting this will matter little for markets.

The Euro's Week Ahead

The European Council meeting set to run from June 28-29 could offer some intrigue for the Euro.

The key topic to monitor is that of migration as Germany will be seeking to form a new consensus concerning the matter at this week's meeting.

Migration has shot to the top of the political risk board for the Eurozone over recent days thanks to a disagreement in Angela Merkel's ruling coalition. Long-time partners the CSU are pushing for a more robust stance to be adopted by Germany with regards to taking in asylum seekers.

At issue are those asylum seekers arriving at German borders having already registered for asylum in other EU countries. The CSU believe they should not be granted entry into Germany and the head of the CSU - who serves as interior minister - has threatened to unilaterally block their entry in the future.

This would likely force a breakdown in the coalition and draw questions on Merkel's leadership.

Merkel will therefore be seeking agreement with other EU leaders to allow her to send asylum seekers back to the country they originally registered in; if she succeeds we would expect the political risk factor to quickly fade which could be a positive for the Euro.

However, migration is an incredibly tricky and destabilising topic for Europe at present, and we believe Merkel will find the route forward a difficult one to navigate.

Turning to the data docket, watch preliminary inflation numbers on Friday, June 29.

Annualised CPI inflation is forecast to read at 2.0% in June, a smidgen higher than the 1.9% recorded in May.

A 2.0% reading would put inflation on the European Central Bank's target, suggesting their ongoing policy of monetary stimulus is paying dividends.

However, the ECB recently warned it would delay the raising of interest rates until after the summer of 2019 owing to signs inflationary pressures are still lacklustre.

The Euro promptly fell on the news.

Could a surprisingly strong CPI reading this week help reverse some of those losses?

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