Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Though last week we observed a modest growth in this pair, that bullish wave seems to have ended, and over the past couple of days the exchange rate has gone down again. However, the euro is putting up a lot of resistance and has not allowed the pound to push it back to the April minimum.
Determining the ultimate winner in this pair is somewhat tricky, considering both the EUR and the GBP are risk-loving currencies, so they are equally likely to gain from the current market situation. In addition, both the EU and the UK are in the process of recovering from the coronavirus pandemic.
The United Kingdom has been praised for its response to Covid-19 since the beginning of 2021, when the country ensured fast approvals of vaccines and quickly started its massive vaccination program. The UK today is one of the countries with the highest vaccination rate, and definitely the “most vaccinated” nation in G7. In this regard, the European Union is behind, as logistics and different vaccination plans among the 27 member states have resulted in an uneven pace of inoculation against the virus. However, even in the EU things are looking up, and it’s worth remembering that the Covid-19 outbreak was worse in the United Kingdom than it was in continental Europe. Thus, both the EU and the UK are now more or less Covid-19-free and easing lockdown restrictions in preparation for the summer holiday season. Moreover, the European Commission has launched a vaccination passport to facilitate travel within the EU; this is expected to relieve some of the financial pressure on travelers who can now present their vaccines instead of taking costly PCR tests when they go abroad. This is expected to help bolster tourism and speed up economic growth in the EU this summer.
As for fundamentals, data out of the UK and the EU has been positive. Inflation is successfully overshooting the forecasts, which bodes well for both economies. The Bank of England might have the edge, as it stated it is considering some hawkish measures if the data remains so overwhelmingly positive, while the ECB is still sticking to purely dovish undertones. Today’s PMI reports from the UK, the eurozone, and Germany might offer an interesting stand-off and help drive the pair in one direction or the other.
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 0.8595 and 0.8576. The daily resistances are at 0.8637 and 0.8660. The indicators of technical analysis agree in strongly recommending a sell position today.
