Pound to Euro Exchange Rate News Index

The move higher comes as a seriously wounded British pound sterling (Currency:GBP) continue to limp lower in a continuation of 2013 woeful performance.

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Euro is confident as risks surrounding Italian elections ease

"With only one economic release out of the UK on Monday, all eyes are focused on the Italian Parliamentary elections. Preliminary results are expected later on Monday," says the latest MarketPlusFX note from Oanda.

The election race has been tight, with center-left leader Pier-Luigi Bersani favored to win the most seats.

Live EUR/GBP Chart


Exchange Rate
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However, "most analysts expect Bersani to forge a coalition with outgoing Prime Minister Mario Monti, if he is given the chance to do so," says the MarketPlusFX note.

Another factor for euro strength - Merger action

Joe Rundle at Spreadex notes that merger talk in Europe has also helped bit the EUR higher:

"Encouragingly, the euro the advanced to some of its best levels in the past few sessions, trading around the 1.33 level thanks to a strong performance in European stock indicies, particularly the DAX which owes part of its strength to CME Group approaching Deutsche Boerse for a merger.

"Deutsche Boerse shares rose, with traders expressing their joy at the increased deal activity during the course of the month."

But, is this euro rally only temporary?

While the euro pound exchange rate declines are certainly unremarkable, the euro's performance elsewhere is not assured.

"After last week’s EUR selloff which broke the 40-day moving average, the single currency still looks to be a better sell on rallies from a trading point of view," says Shaun Osborne at TD Securities.

Osborne believes that, while the EUR (and the rest of the European currencies) have seen a decent bid since the opening of trading this week, "selling rallies still looks like the better strategy unless we decisively get back above the 13340/50 zone."

Elsewhere: JPY back to losing ways?

The JPY opened the week under pressure and is the at the bottom of the G10 performance rankings ahead of the North American open after some weekend comments by Prime Minister Abe suggested the potential appointment of a BoJ head that sees considerable room for more stimulus.

That helped USD/JPY poke marginally above the neutral range that has developed since early February, but the move was fleeting and has mostly retraced through the European session.

"A more decisive break is needed to signal higher levels ahead and this looks to us like more of a minor new high water mark for the existing neutral trend," says Osborne.