Home Forex News EUR/GBP Grinds Lower To 1-Week Lows On Pound Strength

EUR/GBP Grinds Lower To 1-Week Lows On Pound Strength

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  • U.K GDP Contraction
  • End-Month Flows
  • ECB Stimulus Plans

The EUR/GBP pair bounced back, Wednesday morning, after losing some ground on the Euro coming under pressure against the British Pound on Tuesday. The pair was up by more than 0.2% Wednesday morning after finding support above the 0.90 level.

GBP Outlook

The British Pound, which has been under pressure in recent weeks, gained momentum against the Euro on the back of end-month flows and improvement in risk appetite in the currency market. The pair has since bounced back to one – week highs but with a bearish outlook.

Time                            : 07-01-2020

Pivot                           : 0.9091

Technical View           : Long Above 0.9111

Target                         : 0.9131 next 2 targets are 0.9183 and 0.9219

Comments                  : Weak Bearish To Neutral

Last Price                    : 0.9051

Technical View           : Short below 0.9071

Target                         : 0.9051 next 3 targets are 0.9025, 0.8999 and 0.8948

The Sterling remains under pressure weighed heavily by concerns about the U.K economy. The final data released indicate that the U.K economy shrank by 2.2% in the first quarter, the biggest GDP drop since 1979. The contraction stems from the effects of the COVID-19 disruptions.

In addition, Pound’s sentiments have been weighed heavily by Brexit uncertainty having become clear that the is far off from reaching a trade deal with the EU. The uncertainty coupled by contraction triggered by the COVID-19 should continue to weigh heavily on the Pound.

Euro Strength

The Euro, on the other hand, has remained upbeat in recent weeks, amid a plethora of exciting economic data. Better than expected PMI data early in the week all but affirms sentiments that the EU economy is on a recovery path.

Similarly, the European Central Bank has moved to accelerate economic recovery from the COVID-19 pandemic, by injecting liquidity into the system at a frantic pace. The central bank has already expanded its balance sheet to over 50% of the Eurozone’s GDP. It has also increased the size of its bond purchase program by €600 billion euros to €1.35 trillion.

The ECB being aggressive in revitalizing the Eurozone economy is seen as one of the catalysts that continue to strengthen sentiments on the single currency against the Pound.

Some of the events likely to shake up the EUR/GBP exchange rate on Wednesday include the release of Germany unemployment Change as well as the unemployment rate. Similarly, traders await the release of the Eurozone Markit Manufacturing PMI Final.

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