Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. For over two weeks now the exchange rate of this pair has been climbing higher and higher, stopping just below 0.86, the highest level in two months.
Right now the British pound sterling is not having a good time. Despite the overall success of the vaccination campaign in the United Kingdom, very high daily infection rates remain an alarming factor, especially considering that the country has not felt the full impact of Omicron yet. Thus, there is speculation that the UK government is planning another lockdown and another work-from-home scheme, which is certainly going to cause a slowdown in the economic recovery of the country. In addition, Boris Johnson’s cabinet is currently involved in a political scandal regarding speculations that the PM threw his ministers a Christmas party last year when mixing households was banned due to Covid-19. It may sound trivial, but with Labor popularity growing and Boris Johnson’s reputation turning worse than ever, an incident such as this one could lead to potentially serious consequences for the government. Thus, the pound remains weak at the moment.
The euro cannot brag with much, but at least it is a stable currency with a predictable background. Investors are used to the European Central Bank’s dovish stance on monetary policy. Even the possibility of further lockdowns in the EU, whose population is far less vaccinated compared to the UK, might already be priced in, because at this point it’s old news. Therefore, while the euro struggles in the face-off with other currencies such as the US dollar, it is more than capable to pressure the pound for the time being.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8563, with the pair currently trading above it. The daily support levels lie at 0.8525 and 0.8466. The daily resistances are at 0.8622 and 0.8660. The indicators of technical analysis agree in strongly recommending a buy position today.
