EUR/GBP dips further to test 0.8450 support area
|- The euro resumes its downtrend to hit 19-month lows at 0.8450.
- The pound remains bid on BoE hike expectations.
- A sustained move below 0.8437 would accelerate the downtrend – Credit Suisse.
The euro has resumed its negative trend against the British pound on Thursday, hitting prices below 0.8470 for the first time since last August, to test 19 month-lows at 0.8450, which so far has resisted the pressure.
The pound remains firm on BoE tightening expectations
The British pound maintains a firm tone, buoyed by market expectations of a BoE rate hike early next year, and probably further tightening to follow to tackle inflationary pressures. Surging energy prices have pushed yearly inflation to levels almost twice the Bank of England’s target for price stability which has prompted some Bank officials to admit the possibility of accelerating the monetary policy normalization plan.
Furthermore, the European Union’s proposal to scrap custom checks for products arriving in Northern Ireland from Britain has eased fears about another stand-off with the Union, which has increased demand for the pound.
EUR/GBP: Breach of 0.8437 would accelerate the downtrend – Credit Suisse
According to the Credit Suisse's FX Analysis team expect the 0.8449/37 support area to hols although, they warn about the possibility of downward acceleration if such level is broken: “Whilst we would again look for a fresh hold at 0.8449/37 and swing higher in the channel, a sustained move below 0.8437 would mark an acceleration in the downtrend, then exposing the key lows of 2019 and 2020 at 0.8281/39.”
Technical levels to watch
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