Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Over the past few days the rate of this pair has retreated from the maximum reached at the end of June. However, the trend still remains mostly flat, and any swings in either direction are fairly minor.
Similar to other major currencies, the British pound sterling seems to no longer be affected by fundamental reports. Recent PMIs and other data from the United Kingdom have been positive, showing that the economy is recovering from the damage caused by the pandemic. Yet promising results have not been enough to push the pound upwards. The reason for the GBP’s inability to appreciate is that Brexit remains a powerful source of uncertainty. With June behind us, it is now clear that the transition period will end in 2020, with or without a deal. Thus, the pound will be affected by whether there is progress in the negotiations or not. The United Kingdom crashing out of the EU without a deal and resorting to WTO rules will have quite a negative effect on the UK’s economy, which is why the pound is so tightly bound to the Brexit issue.
The overall outlook of the European single currency also depends on politics at the moment. There have been meetings of the eurogroup, as well as the heads of the governments of EU member states in the past weeks, but still no joint stimulus has been agreed upon. The recovery fund proposed by the European Commission is still on the table and will likely be the central topic at any of the upcoming EU summits. The sooner countries agree on a plan, the sooner the euro can stabilize. But considering the UK government is preparing a new stimulus package, if that one passes into effect before the EU takes action, the euro will weaken against the pound.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8990, with the pair currently trading below it. The daily support levels lie at 0.8967 and 0.8951. The daily resistances are at 0.9007 and 0.9029. The indicators of technical analysis strongly recommend a sell position today.
