Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The trend of this pair has been rather unreliable lately, with lots of ups and downs. Just two days ago, the exchange rate spiked so dramatically that it propelled the pair to its highest level in over two months. The rate has corrected itself slightly since then but still remains at a two-month maximum.
Right now the British pound is experiencing some weakness compared to the dollar and the euro. Sterling has weakened against the euro but the reasons for this bearish move are unclear. The Bank of England’s stance on monetary policy, though still dovish, is that it might begin to tighten things much sooner than the ECB plans to do the same. Thus, overall it is expected that the pound will gain more on risk appetite than the euro. But for now, it may be absorbing some of the pressure of the fuel crisis going on in the United Kingdom, as well as the still high Covid-19 infection rates.
As far as the European single currency is concerned, things are set to remain dovish for a while now. The European Central Bank held a policy forum earlier this week where President Lagarde warned that the recent spikes in inflation are tied to the fuel crisis and the bank’s stimulus and do not accurately reflect a steady improvement in the economy, at least not to an extent that would allow the ECB to withdraw stimulus. On the other hand, the latest sentiment reports from the eurozone were quite positive, giving the euro a short-term boost.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8635, with the pair currently trading below it. The daily support levels lie at 0.8611 (overcome) and 0.8587. The daily resistances are at 0.8658 and 0.8683. The indicators of technical analysis mostly agree in strongly recommending a buy position today.
