Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. So far in June we have observed some erratic movement in this pair, with lots of ups and downs, but right now we see the rate has been pushed to its lowest level in three months, and it may go even lower.
The United Kingdom is currently experiencing a bit of a crossroads domestically. Prime Minister Boris Johnson was supposed to announce earlier this week the final end of all lockdown measures on June 21, but instead he called for a four-week extension of the current measures. There is some indication that Covid-19 infections are rising in the UK, mostly amid the younger population, where people are highly social and mobile, but due to their low risk of severe Covid-19 have not been included in the vaccination campaign yet. Plus, there is the Delta mutation of the virus to contend with. Thus, the Prime Minister argued that the next four weeks will provide time for more vaccinations and more preparations so that the UK doesn’t go through another boom of infections when the last of the restrictions are removed.
The delay was subjected to a vote in UK Parliament, where around 60 Conservatives did not support their PM, but overall the restrictions won in a landslide, confirming that the UK will keep the last of its lockdown measures in place for another month. Regardless of this development, though, the prospects of the United Kingdom’s economy remain very good and the recovery is in sight, so the pound will remain an attractive asset to investors.
As for the European single currency, its prospects also remain good overall. The region is recovering from the pandemic and is still vaccinating its population actively, though it is considerably behind the United Kingdom in that regard. Thus, limited lockdown measures and mask mandates are likely to continue on the continent longer than they will in the UK. On account of this slower rate of recovery, the euro is less attractive as a risky asset compared to the pound.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8587, with the pair currently trading below it. The daily support levels lie at 0.8559 (overcome) and 0.8544. The daily resistances are at 0.8602 and 0.8630. The indicators of technical analysis agree in strongly recommending a sell position today.
