EUR/GBP bears need a break and close below 0.8720
- EUR/GBP headed back to 0.8830 or below 0.8720?
- EUR/GBP now depends on Brexit.
EUR/GBP dropped below 0.8820 support on the BoE announcements on Thursday where markets are positioning for a BoE rate hike to come in the summer, but the 185 pip rally in cable was tempered by Brexit concerns. Currently, EUR/GBP is trading at 0.8786, down -0.54% on the day, having posted a daily high at 0.8844 and low at 0.8732. The pound was already drawing bids ahead of the BoE's super Thursday, recovering from1.3845 while the cross's supply came in at 0.8840 leading into the meeting.
Very clear forward guidance from BoE
When Carney and the MPC basically said that the BoE will be hiking rates in the summer, the cross fell hard to aforementioned lows. The post-meeting statement, that, "...policy would need to be tightened somewhat earlier and by a somewhat greater extent" than anticipated in November put the nail in the coffin for the bulls. However, the markets are fully aware that this is a Brexit-contingent hawkish signal and thus some shine was taken out of the pound and a correction in the cross moved the price back to the 100 4hr SMA.
EUR/GBP level
A recovery to 0.8936 as the January high and the 0.9034 October 2017 high looks a tall order and 0.8830 could be a tough area of resistance with the Italian elections looming and instead, the December and January lows at 0.8689/87 are compelling below 0.8720.