Economy Forex News

EUR/GBP falls to new lows below 0.8450

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  • A combination of factors triggers further selling around EUR/GBP on Friday.
  • The ECB’s dovish tilt is seen as a key factor behind the euro’s underperformance.
  • Positive Brexit-related news benefits GBP and puts pressure on the pair.

The EUR/GBP cross has seen heavy selling during Friday’s European session and has fallen to new yearly lows around the 0.8435 level, at levels not seen since February 2020.

EUR/GBP

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The pair has struggled to capitalize on a modest intraday rally

The EUR/GBP pair has struggled to capitalize on a modest intraday rally. Afterward met with fresh selling near the 0.8485 area and has now retreated to new yearly lows. The underperformance of the common currency comes amid a spate of pessimistic comments from senior ECB officials. They stressed that the recent rise in inflationary pressures is largely transitory.

Christine Lagarde, head of the European Central Bank, said Thursday that the pickup in inflation was largely due to temporary factors. ECB member Pierre Wunsch then noted that the rising price pressures in the euro area are temporary. This underlines the desire of policymakers to avoid any premature withdrawal of monetary support.

On the other hand, the money market had fully priced in a 25bps rate hike by the BoE in December. Conversely, two officials indicated no hurry for that matter. Positive developments surrounding the Northern Ireland Protocol of the Brexit deal have also acted as a tailwind for sterling, which has also been supported by a more upbeat BoE.

After days of mounting tension, the European Union has agreed to remove most controls on goods and medicines coming into Northern Ireland from the rest of the UK. However, fears that the UK will reject the EU proposal could prevent GBP bulls from taking aggressive positions. Along with a weaker dollar, this could lend some support to the euro and limit losses for the EUR/GBP cross.

Therefore, it will be prudent to wait for some continuation selling before positioning for an extension of the recent bearish move witnessed over the past three weeks. The EUR/GBP cross could then accelerate the downward trajectory towards testing the next relevant support near the round 0.8400 level.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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