Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. With very small and unimportant exceptions, the trend of this pair has mostly been flat in the last two weeks.
The British pound is facing too many challenges which are preventing it from strengthening at the moment. To begin with, the United Kingdom was heavily hit by the coronavirus. It still remains in a state of lockdown and Prime Minister Boris Johnson has not appointed a date for easing out of it quite yet. The Bank of England has cut rates several times to boost the economy but the impact of the coronavirus is still not fully known. Moreover, besides the fallout from the pandemic, the pound will be pressured in the long term because of Brexit, considering the negotiations for a new comprehensive trade agreement with the EU have a deadline in December.
The European single currency is also not having the best of times at present. After several summits, European leaders still failed to agree on concrete terms for a plan to support the economy throughout the coronavirus crisis. Without a unanimous agreement and a robust stimulus plan, the euro will be exposed to more risk. Today the European Central Bank is holding a policy meeting, but it is unclear what more it can do to help, as its policy was already quite dovish even before the pandemic began and interest rates were lower than everywhere else to begin with. Still, any supportive action from the ECB is better than no action at all and could relieve the euro from some of the stress. Later in the day we expect flash reports on inflation and GDP growth, which will indicate just how hard the EU economy was hit by the pandemic.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8724, with the pair currently trading slightly below it. The daily support levels lie at 0.8691 and 0.8659. The daily resistances are at 0.8756 and 0.8789. The indicators of technical analysis agree on a strong sell recommendation.
