Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The pair remains within the broader downtrend that began at the beginning of January. Over the past few days it managed to drop to its lowest level in ten months.
The British pound sterling is in an excellent position to keep strengthening. The pound has become the most risk-friendly currency of late. It is supported by the Covid-19 vaccination efforts in the United Kingdom, which are arguably the fastest in the world. As a result, investors are hopeful that the UK will make a faster economic recovery than other countries. The Bank of England confirmed as much by stating it will not cut interest rates into negative territory and might even curb its asset purchasing program by the end of the year. These factors are making the pound’s outlook bullish and promise further strength in the sterling against other currencies.
As for the euro, at present it is not hindered by domestic factors that can weaken it. The latest economic reports from the eurozone have been upbeat, especially with regard to GDP growth and inflation. This shows that the European Union is not in as bad of a state as previously feared. However, the EUR is not gaining as much on risk as the GBP is. The reason for this is that Covid-19 vaccinations in the European Union are happening at a much slower pace than in the United Kingdom. The European Central Bank is also more likely than the Bank of England to remain dovish for a longer period of time. Thus, the euro is set to continue losing to the pound for as long as these conditions remain the same.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8696, with the pair currently trading below it. The daily support levels lie at 0.8672 and 0.8655. The daily resistances are at 0.8713 and 0.8737. The indicators of technical analysis agree in strongly recommending a sell position today.
