Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The chaos around Brexit is causing a lot of fluctuations in this pair.
The British pound’s massive decline stopped in early August and since then, the sterling has been trying to recover, pushing the rate lower. The pound’s movements are difficult to predict at the moment because of the complicated political situation in the United Kingdom. This week Parliament was disbanded upon PM Boris Johnson’s request. However, before they left, members of parliament succeeded in passing legislation that makes it very difficult for the Prime Minister to act without Parliament’s approval. While two weeks ago a hard Brexit seemed almost certain, the country now seems to be headed for a preliminary election, a Brexit delay, and possibly a second referendum.
Meanwhile, the euro is under heavy pressure at present because the European Central Bank is having their monthly policy meeting. Based on the disappointing economic data coming from the eurozone, the ECB is widely expected to announce a stimulus package. From today’s meeting, investors anticipate the ECB to lower their deposit facility rate to -0.50%, but an interest rate decrease is not very likely. If the ECB cuts the rate below 0, this would shock the markets and cause a slump in the euro.
In terms of the daily chart, today we have a pivot point for the pair located at 0.8929, with the pair currently trading above it. The daily support levels lie at 0.8906 and 0.8881. The daily resistances are at 0.8953 and 0.8977. The indicators of technical analysis suggest a strong sell in the daily term.
