EURGBP News

Today's View Of The EUR/GBP

May 25 • Between the lines • 1617 Views • No Comments

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Yesterday, trading in the EUR/GBP pair was confined to a very tight sideways trading range in the low 0.8000 area. This relative calm occurred even as there were quite some headlines both from EU and the UK.

The euro was under slight pressure at the start of trading in Europe as investors were disappointed on the lack of results of the informal EU Summit on Wednesday evening. Early in Europe, the news flow turned further negative as the PMI’s in the euro zone and the German IFO indicated a sharp setback in economic activity.

EUR/GBP reached an intraday low at 0.8000, but a break of the recent lows just below the big figure didn’t occur. Mid-morning, the details of Q1 UK GDP brought also an unpleasant surprise. Growth was downwardly revised from -0.2% Q/Q to -0.3%Q/Q and the details were also not inspiring at all. This Q1 GDP report raised speculation that the BoE might restart its programme of asset purchases very soon. However, the impact of EUR/GBP trading was again limited. EUR/GBP returned to the 0.8025/30 area early in US trading.

However, the EUR/GBP cross rate didn’t regain any important resistance. Later in the session, EUR/GBP joined the broader decline of the EUR/USD headline pair. EUR/GBP closed the session near the recent lows at 0.7999 (compared to 0.8019 on Wednesday).

 

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Today, calendar in the UK is empty. So, EUR/GBP trading will be driven by the overall performance of the single currency. We assume that it will be difficult for EUR/GBP to sustain above the 0.8000 mark.

From an analytic point of view, the EUR/GBP cross rate is showing tentative signs that the decline is slowing. Two weeks ago, the key 0.8068 support was cleared. This break opened the way for return action to the 0.77 area (October 2008 lows).

Last week, the pair set a correction low at 0.7950. From there, a rebound kicked in/short squeeze kicked in. The pair broke temporary above the MTMA, but the gains could not be sustained. Sustained trading above the 0.8095 area (gap) would call off the downside alert. A first attempt to do so was earlier this week. A further setback in the 0.7950/0.8100 trading range is favoured.

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