Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Over the past several days we have observed some very choppy trading in this pair, with a big drop yesterday and an upward correction currently in motion.
As we have reported previously, the situation of the British pound is more stable than that of most other currencies. The United Kingdom is ahead when it comes to its response to Covid-19 and the pound is still in a good position to gain from risk appetite. However, there have been a few recent concerns. In terms of fundamental reports, the manufacturing PMI in June was disappointing, as was the quarterly GDP growth rate. Moreover, the pound might lose some popularity points right now because the United Kingdom is seeing thousands of new coronavirus cases, mostly the Delta variant of Covid-19 which originated in India. This can mean prolonged lockdowns, cancelled flights and other measures that will affect the United Kingdom’s economy negatively.
It is fair to admit that the spread of the Delta variant is also a concern for continental Europe. The European Union so far has seen fewer Covid-19 cases than the UK but it also tends to lag behind infection outbreaks compared to its ex-member state. With the inability of European countries to agree on coordinated policies regarding travellers coming from the United Kingdom and an overall lower vaccination rate in the EU, it is possible that another outbreak will start there too once enough cases of the Delta variant make their way to the continent, especially considering the increased travel rates during the summer holiday season. Economic reports from the eurozone have so far been very consistent with the forecasts, but with the threat of another outbreak looming over Europe, it is unclear how the EUR/GBP pair will fare.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8583, with the pair currently trading above it. The daily support levels lie at 0.8555 and 0.8540. The daily resistances are at 0.8598 (overcome) and 0.8626. The indicators of technical analysis agree in strongly recommending a buy position today.
