Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After spending nearly four months within a downward trend, the pair finally started growing again last week and is currently trading at a four-week high of 0.8646.
Generally speaking, there is no reason for the British pound to be losing positions to the euro. The United Kingdom, thanks to its speedy vaccination campaign, is on track to recover from the coronavirus pandemic well before the European Union does. This is boosting confidence in the British economy and the pound. There have been some minor glitches here and there, but they are not enough to explain the current situation. For instance, the UK raised some red flags about the AstraZeneca vaccine as it found domestic cases of rare blood clots that are likely linked to the vaccine. Still, that problem put it on even footing with the EU, so it shouldn’t affect the pound much. It is true that there were some disappointing economic reports coming from the UK this week (most notably, the most recent PMIs), but the impact of these results is most likely going to be short-lived.
As for the European single currency, it has been partially supported by positive PMI data out of the eurozone. Still, the pace of the pandemic is more concerning in the EU than it is in the United Kingdom. Europe will be slow to recover due to its sluggish vaccinations. Plus, today’s minutes from the most recent policy meeting of the European Central Bank are likely to hint at further dovishness. If that is indeed the case, the euro will weaken slightly. Overall, the euro’s prospects are worse than the pound’s, so the rally could end at any moment.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8628, with the pair currently trading above it. The daily support levels lie at 0.8591 and 0.8543. The daily resistances are at 0.8676 and 0.8713. The indicators of technical analysis agree in strongly recommending a buy position today.
