EUR/GBP: eyes 0.8866 target in reversal of 0.8720 lows
|Currently, EUR/GBP is trading at 0.8815, up 0.73% on the day, having posted a daily high at 0.8837 and low at 0.8739.
EUR/GBP is on firm ground and deeply so on the 0.84 handle, albeit with some more to go to be entirely convincing of a full on reversal of the 0.8866 12th June highs.
Sterling has lost its shine today, a sell-off that commenced in European trade, and is underperforming all of the G10 currencies in response to Gov. Carney’s Mansion House speech that completely nullified recent remarks from Forbes in respect to rate rises when Carney called for patience in adjusting policy.
- BOE’s Carney: Now is not yet the time for rate adjustment
- GBP/USD pushes lower to 2-month lows on political turmoil
Remember, Forbes is out of the door and we have the new MPC member, appointed by Philip Hammond. The LSE economics professor, Silvana Tenreyro, will get her first chance to vote on interest rates at the committee’s next meeting in August. However, her stance on Brexit is concerning (in the context of policy) and given that it is very much the pattern for newly appointed committee members not to vote against the consensus view, she is considered to be a dove. This is a weight on sterling for the foreseeable future and markets are unlikely to get too carried away with hawkish sound bites this year. The BoE will be watching wages and the unemployment rate approaching the equilibrium rate of 4.5% with actual at 4.6%.
"The Gov. has specifically spoken to the need to see other components of demand offsetting weaker consumption and for the broader response to Brexit. A reminder that Chief Economist Haldane speaks at 7 am ET on Wednesday" noted analysts at Scotiabank.
EUR/GBP levels
"EUR/GBP remains capable of retesting the 0.8852 January high and will need to close above here to confirm further upside potential to 0.8987/.9059, the 61.8% retracement and the highs from mid-October, as explained by analysts at Commerzbank. "Technically we have little to suggest that the market will sustain a move above this high, which is reinforced by the 0.8858 50% retracement of the move down from the 0.9403 spike high, but the market will stay bid above the 0.8731 short term uptrend."
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