Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The rate underwent a steady drop over the past ten days and settled near a two-month minimum before taking off again yesterday.
The British pound sterling is currently under the influence of several factors. Firstly, there is modest optimism about the possibility of a trade agreement between the UK and the EU. Both sides have engaged in intense negotiations and have been quiet for a few days. This week both the UK and the EU reported that while they still don’t have a deal due to several major differences, progress has been made. The next couple of weeks will be crucial as the UK is running out of time. The second factor pressuring the pound is the spread of the coronavirus in the UK. Despite local lockdowns, Covid-19 numbers continue to rise, especially in the London metropolitan area, which was spared from the most drastic measures. Meanwhile, the Bank of England today left its interest rate unchanged but increased its QE program more than expected, offering quick stimulus for the UK economy. This easing is contributing to the weakness that the pound has demonstrated this week.
The economic outlook for the European single currency has weakened. The coronavirus has proven that it remains a major threat to the continent still. Europe added over 280,000 new cases to its tally yesterday, with the biggest numbers coming from France, Italy, Spain, Germany, and Poland, all with over 20,000 cases each. The infection rate is rising despite EU member states entering nation-wide lockdowns, which means we could see the restriction in place even after November. The second fight with the coronavirus will take an even greater toll on the European economy, which is why the euro is under so much pressure lately. In addition, the ECB signaled that it may further loosen its policy come December in an attempt to mitigate the impact of Covid-19, but this may weaken the euro even more.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9001, with the pair currently trading above it. The daily support levels lie at 0.8966 and 0.8907. The daily resistances are at 0.9060 and 0.9095. The indicators of technical analysis are a bit mixed but lean towards a sell recommendation today.
