Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After a brief period of recovery, the rate of this pair headed down once more, and has been moving in a bearish manner for over a week. Right now the pair is trading at its lowest level in almost four months, around 0.8505.
Right now the British pound sterling has a better positioning than the euro. The United Kingdom officially ended all lockdowns last week and has fully reopened its economy. White it is true that Covid-19 cases spiked due to the spread of the delta variant, hospitalizations remain low. This indicates that the vaccines are working well and are preventing severe Covid-19 disease even among those who tested positive for the virus. In addition, vaccinations among the younger population are still ongoing, so the UK is improving its chances of beating the pandemic each day. The Bank of England will likely have reasons to tighten monetary policy before other central banks, which is going to give the pound an edge, especially against the euro.
The European Central Bank is the complete opposite of the BoE. Just last week at its monetary policy meeting it announced that it will allow for inflation to rise consistently above 2%. The ECB will not hike interest rates or reduce its bond purchases until it sees inflation rise and stay above that level for a while. As a result, investors now foresee dovishness from the ECB for slightly longer than previously expected. Thus, the euro’s outlook has turned bearish for the time being. Inflation and GDP data from the eurozone and Germany specifically can give the euro a short-term boost but don’t expect too much.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8513, with the pair currently trading below it. The daily support levels lie at 0.8502 and 0.8486. The daily resistances are at 0.8529 and 0.8540. The indicators of technical analysis agree in strongly recommending a sell position today.
