- ECB Stimulus Package
- K Negative Interest Talk
- EU Economy Contraction
EUR/GBP is back to one-week highs after coming under immense selling pressure on EUR weakness early in the week. Concerns that the U.K could resort to negative interest rates in a bid to rejuvenate a struggling economy triggered Pound weakness conversely triggering an upswing the EUR/GBP pair
The EUR continued to pair losses against other G10 currencies on reports the European Central Bank is closing in on a massive $842 billion stimulus package. The package is part of the ECB push to cushion the struggling EU economy that is on the brink of recession.
Sentiments on the EUR/GBP turned bullish in early Wednesday trading session after sellers pushed the pair lower in late Tuesday trading session. The pair was up by 0.40% in the early Wednesday session threatening to break through a key resistance level as part of the emerging uptrend.
Standing in the way of EUR/GBP registering more gains is ECB President Christine Lagarde warned that the EU economy is staring at a recession. Lagarde has warned that the economy could shrink by up to 8% in 2020.
The pair could also give up some of the gains registered, depending on the outcome of the EU confidence data. However, the losses could be curtailed given that the British Pound is also defensive amidst concerns about the U.Ks economy.
Investors speculating about the possibility of the Bank of England plunging the U.K into negative interest rates to cushion the struggling economy should also continue to weigh in on EUR/GBP. Negative interest rates could trigger weakness on the British Pound, a development that could result in the EUR/GBP pair rallying.
A potential debt crisis, as eluded by EIU economist, is another tailwind that should continue to weigh in on EUR strength going forward. The economist has already warned that some EU member states are on the brink of crisis due to pandemic.