Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Up until the end of last week the exchange rate of this pair was moving within a strong bearish trend. However, this week the rate rebounded from it and climbed to its highest level in ten days.
Between these two European currencies, the British pound has a much better chance to dominate the pair. Recent fundamentals from the United Kingdom have led investors to expect an interest rate increase by the Bank of England in the foreseeable future. In fact, it was expected this month, though this did not become a reality. The likelihood of it happening next month is increasing, though. Plus, recent statements by economists from the BoE have confirmed that monetary policy tightening is coming. Moreover, the UK economy does not appear to be threatened by new lockdowns, as Boris Johnson’s government insists that thanks to the high vaccination rate and the approval of booster shots for the already-vaccinated, life in the UK can go on as usual without restrictions.
The situation is quite different in the European Union, where coronavirus cases are rising every day. Austria already entered a new lockdown, while the EU’s economic powerhouses Germany and the Netherlands might soon announce lockdowns of their own, considering the dangerous Covid-19 trends in those countries. Plus, as we already know, there will not be an interest rate hike by the ECB - not soon, not next year, perhaps not even the year after that. In the present market conditions, the euro just doesn’t stand a chance versus the pound. The only thing that might turn the tide for the EUR is Brexit, i.e. the negotiations regarding Northern Ireland. If Article 16 is triggered by the UK, the pound could weaken against the euro, but for now there is no news regarding this issue.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8399, with the pair currently trading above it. The daily support levels lie at 0.8382 and 0.8366. The daily resistances are at 0.8415 (overcome) and 0.8432. The indicators of technical analysis agree in strongly recommending a sell position today.
