Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Earlier this week the pair climbed to its highest level in two months, but then it underwent a sharp downward correction and dropped below 0.86 again.
At present, the British pound sterling is not doing too well. The United Kingdom is experiencing a massive outbreak of the delta variant of Covid-19, though thankfully hospitalizations and lethalities are staying very low, thanks to the vaccinations. Nevertheless, the UK’s track-and-trace app is keeping many people at home right now, which is going to cause interruptions for businesses, even though the last of the lockdowns were lifted on Monday. These disruptions in economic activity will have an impact on the UK’s recovery from the pandemic. In addition, the United Kingdom is also in trouble with the EU over the Brexit withdrawal agreement. Prime Minister Boris Johnson wants to have free trade between Northern Ireland and the rest of the UK, but the former still adheres to EU rules in order to enjoy a closer relationship with the Republic of Ireland. Such actions by the UK government will be in violation of the agreement signed with the European Union, which spells political trouble and more uncertainty for the pound. Plus, right now investors are trying to avoid risky assets like the pound, so everything is against the GBP.
As for the euro, it is doing a bit better, regardless of what the last two days might suggest. Europe is not struggling with the delta variant of Covid-19 to the same extent as the United Kingdom is. Moreover, Brexit issues don’t have the same weight on the euro as they do on the pound. While it’s true that the euro is also a risk-loving asset and is also not at its best right now, it has fewer factors against it than the pound. Its present weakness is likely due to the fact that today there is a monetary policy meeting of the European Central Bank, which is adding volatility to euro pairs. Once the meeting is over, provided there are no surprises, the euro will likely take off against the pound again.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8618, with the pair currently trading below it. The daily support levels lie at 0.8576 and 0.8554. The daily resistances are at 0.8640 and 0.8682. The indicators of technical analysis are a bit mixed but lean towards recommending a sell position today.
