Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. Despite optimism about the possibility of a comprehensive trade agreement between the EU and the UK, the pound has been losing positions against the euro over the past week. Right now the pair is trading at a five-week maximum.
The main event influencing the British pound sterling at the moment continues to be Brexit, and more specifically the negotiations between the United Kingdom and the European Union. The two sides have yet to agree on the details of their future trade relationship. Multiple deadlines were missed and at this point the talks are running on no time at all. December, on account of the end-of-the-year holidays, is a rather short business month. With only this many days of the UK and EU Parliaments operating, and with so many things on the agendas of both, experts now speculate that a deal may come as early as tomorrow or as late as Monday, so that it may begin making its way through Parliament next week. If the ratification process does not begin next week, the markets will assume no deal is happening because there will be no time for it to pass through all of the authorities that need to approve it. The worry of deal versus no deal is so great that it managed to overshadow the fact that the UK will be the first country to start vaccinating its population against Covid-19. Ending the pandemic has been such a major drive for the markets in every regard, so one could only imagine how much worse no-deal Brexit would be for the UK if the pound is not appreciating on the news of vaccines becoming available next week.
As for the European single currency, it is absolutely riding the wave of optimism brought about by the news of multiple vaccines pushing for EU (and US) approval by the year’s end. Investors are so happy about the anti-Covid-19 drugs that they are willing to overlook the damage to the economy dealt by the virus in Q4, whose extent we have not seen fully yet. Even the fact that the European Central Bank is preparing to loosen its monetary policy further next week is not enough to stop the euro’s rally. Today’s better than anticipated composite PMI is also strengthening the euro’s case.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9044, with the pair currently trading slightly below it. The daily support levels lie at 0.9002 and 0.8943. The daily resistances are at 0.9103 and 0.9145. The indicators of technical analysis agree in strongly recommending a buy position today.
