Prediction for EUR/GBP: Speakers from the ECB put the Euro central place

Market Analytics and Considerations

Key Notes

• The euro benefits from the ECB’s continuing aggressive attitude as compared to a more restrained GBP.
• Prior to Friday’s important UK and EZ-centric statistics, U.S. CPI could give some momentum.
• On the daily EUR/GBP chart, a breach is imminent.

BASELINE BACKGROUND

Through the ECB starting yesterday, the euro strengthened its gains against with the British pound. Isabel Schnabel, one of the more assertive officials, reinforced the hardline message, and ECB’s Villeroy said that future interest rate increases are needed in his remarks today. Currency markets are currently factoring in roughly 2 sequential 50bps increases between February and March. The Bank of England (BoE), in contrast hand, is believed to proceed a bit more gradually given that they started their cycle of rate hikes far earlier than the ECB. Nevertheless, relatively greater rate increases may encourage euro appreciation over the coming months.

When it comes to energy, both the UK and the eurozone have benefited from dropping crude and gas prices, but as restrictions and price controls on Russia become more stringent, a response from that country might result in energy prices going up once again.

Regarding the UK and EZ areas, the economic docket is quite quiet both today and tomorrow; however, tomorrow will bring the U.S. CPI data, which could provide additional support for the euro assuming inflation display signs of the further decrease. Some significant UK and EZ statistics will be revealed on Friday (see here for), notably EZ industrial production and UK & German GDP (a surrogate for the EZ territory).

The price movement on the EUR/GBP daily chart is moving in a lateral accumulating configuration that mimics a rectangular formation   The much-needed impetus to burst out of this zone may be provided by tomorrow’s U.S. CPI statistic, and the Relative Strength Index (RSI) supports making the move, although slowly.

Resistance levels:

Support levels:

With 70percent of traders presently owning short bets, market participants are presently Bearish on EUR/USD –  we frequently adopt an alternative approach to the common opinion, leading to a relatively brief time frame bullish skew.