Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After the peak at 0.9254 reached in mid-September, the trend has shifted downward - not very confidently, if the constant ups and downs are any indication. Still, the exchange rate remains above 0.90 for now.
The British pound is currently under the influence of two factors - Brexit negotiations and the spread of the coronavirus pandemic in the United Kingdom. In terms of the former, the pound has rallied this week after a meeting between PM Boris Johnson and EU Commission President Ursula von der Leyen on Saturday, as both leaders seemed optimistic about reaching a trade agreement. However, the chief negotiators for both sides have been less positive, saying that several big issues still remain. Meanwhile, Johnson has stood by his earlier statement that if a deal doesn’t come by October 15, the UK will walk away from the talks. This means that next week will be crucial since that deadline is approaching fast. As for the pandemic, the UK is experiencing higher infection levels than it did earlier in 2020, though not as lethal, and is currently dealing with local lockdowns. The pace of the pandemic will determine whether the UK economy will be dealt another blow by Covid-19 or continue its recovery.
The coronavirus is also a key issue when it comes to the euro at the moment, because many countries in the EU are seeing the same resurgence of the virus that is present in the United Kingdom. Nevertheless, the European Central Bank has been relatively reassuring, with ECB President Christine Lagarde stating that the interest rate can be cut further to support the economy. The European single currency has proven that it responds to stimulus quite well, as indicated by its massive summer rally. Thus, the euro is expected to strengthen in the long term. In addition, if the UK and the EU fail to reach a trade agreement, most of the negative impact will be on the pound, not the euro.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9120, with the pair currently trading below it. The daily support levels lie at 0.9075 and 0.9049. The daily resistances are at 0.9147 and 0.9191. The indicators of technical analysis agree on a strong sell recommendation today.
