Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. If one thing could be said of this pair’s movement this summer, it is that it has been erratic, with lots of ups and downs, without a great change in pricing. In August alone, the pair has been trading in a very narrow channel between 0.89 and 0.90.
The British pound continues to be under the influence of political developments. The most important factor for investors right now is how the negotiations between the United Kingdom and the European Union are going. The two sides are currently meeting for the seventh time since Brexit took place; this is the last scheduled gathering of negotiators, though many suspect there will be new meetings appointed in September, considering most of the work towards an agreement still lies ahead. This week the UK government expressed a hope that a compromise is possible and a deal can be reached in September. Nevertheless, experts are skeptical because the government’s hopes are not solid proof of progress and many of the contested points in a possible agreement remain problematic for both the UK and the EU. The pressure is so great that the British pound is struggling to strengthen versus the euro, even as inflation reports from the UK came in better than expected this week.
The euro, on the other hand, remains much better positioned than the British pound. Thanks to ample stimulus from various sources, European countries are quickly getting rid of the coronavirus pandemic. The improvements in economic reports from all across the EU show that the stimulus is doing its job. The details of the latest ECB meeting which will be published later today are not expected to bring any surprises along. Overall, the euro is holding a steady course. As long as tomorrow’s PMI reports don’t disappoint, the European single currency will not weaken against the pound.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9028, with the pair currently trading right around it. The daily support levels lie at 0.9009 and 0.8983. The daily resistances are at 0.9054 and 0.9073. The indicators of technical analysis agree on a strong buy recommendation today.
