EUR/GBP trims losses although it remains below 0.8500
|- The euro remains weak, limited below 0.8500.
- Expectations of a BoE rate hike have boosted the pound.
- EUR/GBP: Breach of 0.8449 support would increase bearish momentum – Commerzbank.
The euro is picking up on Friday, after having depreciated for six consecutive days. The pair, however, remains on the defensive below 0.8500, at a short distance from 0.8450 year-to-date lows.
Pound rises on BoE tightening expectations
The British pound has been showing strength against the main currencies this week, buoyed by market expectations that the Bank of England might be the first major central bank to hike interest rates after the COVID-19 crisis. The BoE could start increasing interest early next year in an attempt to tackle inflationary pressures.
BoE hike expectations and the moderate risk appetite observed this week seem to have offset market fears about the fuel shortages in the UK, which sent the sterling tumbling over the previous weeks. Against the euro, the pound has appreciated nearly 2% after bottoming in late September, while against the US dollar the pound has rallied 1.75% from the previous week’s lows.
EUR/GBP: Breach of 0.8449 lows would expose the 0.8239 target – Commerzbank
From a technical perspective, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, warns about a bearish move below 0.8449: “EUR/GBP is under pressure near term following last week’s failure just ahead of 0.8671, the July 2021 high. The market has reacted back to key support at 0.8471/49, the recent lows and lows since 2019. We again look for these to hold the downside (…) “Below 0.8449 would target the 0.8239 2019 low.”
Technical levels to watch
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