Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The pair spent the weeks leading up to the UK general elections gradually dropping, but as of this week, the pound has weakened once more.
The British pound initially received a boost after last week it was confirmed that Boris Johnson will remain as Prime Minister, and secure a Conservative majority in Parliament to help him run the country without any opposition. However, this week Johnson announced that he plans on passing a bill to shorten the transition period that the United Kingdom will enter after it leaves the EU on January 31.
The transition is a time when the UK will continue to act as part of the bloc while it negotiates agreements on trade, migration, military and economic cooperation, etc. with all EU member states. From the three years that the UK is legally allowed, Johnson plans to cut this time down to 11 months, despite the many complicated deals he’d have to secure.
The PM’s focus on being swift rather than thorough might jeopardize the UK’s relationship with the EU even further and add more economic uncertainty after Brexit. Hence, the British pound has weakened.
As for the rest of the European Union, the news is scarce. There will be no key data publications for the rest of the month, and the markets have quieted down as the Christmas and New Year’s holidays are just around the corner. The economic outlook for the euro remains pessimistic, as the ECB is maintaining a dovish course and inflation is still far below the ideal level of 2%. Thus, it is the changes with the pound’s situation that currently affect the pair.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8499, with the pair currently trading very near, just a pip or two above it. The daily support levels lie at 0.8480 and 0.8464. The daily resistances are at 0.8515 and 0.8534. The indicators of technical analysis recommend a strong buy in the daily term.
