Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. After a short slump, the price kicked off bullishly again this week, though today it remains volatile.
The British pound has had a pretty awful run in the past few weeks, shedding over 4% of its value recently. The reasons for this are purely political, namely the election of Boris Johnson as the next Prime Minister. Johnson’s leadership is threatening the stability of the pound because he has vowed to take the UK out of the European Union by October 31, with or without a deal. The Bank of England, the IMF, and the ECB have long warned that a hard Brexit will be bad for the economy and the risk Johnson poses is a clear sign of that. Today the BoE chose not to lower interest rates but in the future they may take a page out of the Federal Reserve’s book and do an insurance rate cut to shield the economy from a Brexit-induced recession.
The euro lacks internal incentives to strengthen. In fact, the European Central Bank is preparing for another softening of the monetary policy, though it is not certain if it’ll happen with a rate cut or stimulus packages yet. Despite this, inflation has increased slightly and the latest PMI data was positive, so things aren’t too grim in the EU. However, the pressure of Brexit, as well as the ongoing trade conflict between the US and China, are slowing down economic growth.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9126, with the pair currently trading below it. The daily support levels lie at 0.9071 and 0.9032. The daily resistances are at 0.9165 and 0.9220. The indicators of technical analysis are confident in giving us a strong buy recommendation.
