Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The trend of this pair has been in a steady decline since February 12. At the moment, it is trading at its lowest level in almost one year at around 0.8625.
The British pound continues to be one of the most attractive assets to investors. Currently, risk appetite is the predominant mood among market participants, and the pound has cemented its position of favorite risky asset. The reason for this is that the United Kingdom is leading the charge in terms of Covid-19 vaccinations. This puts the UK in a position to recover economically from the pandemic much faster than other countries, especially the European Union. The Bank of England recently confirmed these hopes by stating that it is not considering cutting interest rates any further, i.e. no additional dovishness will be necessary. Prime Minister Boris Johnson also talked about reopening the economy in light of the much lower Covid-19 infection rates that the United Kingdom is observing lately. If the current market conditions hold, the pound will remain a strong asset.
As for the European single currency, it has definitely seen better days. The euro is risk-friendly like the pound, but has not been able to absorb quite as much of the risk appetite of investors as the pound has. As mentioned above, the European Union has been much slower in its own vaccination efforts, which is leading investors to expect a slower recovery in the bloc compared to the UK. Though fundamental reports from the EU have mostly been good recently, some confidence readings indicate problems here and there, not to mention the struggles of the services sector, which has been affected the most by the lockdowns. Because of the growth and recovery disparity, the euro can’t resist the pound very well.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8586, with the pair currently trading above it. The daily support levels lie at 0.8555 and 0.8510. The daily resistances are at 0.8631 and 0.8662. The indicators of technical analysis agree in strongly recommending a sell position today.
