• EUR/GBP is falling into daily support and offered from both weekly and hourly resistance.
  • Bears are fuelled by higher GB rates expectations and weaker German data.

Besides a weaker US dollar, EUR/GBP is in the hand of the bears on Thursday following a strong offer in the UK bond market following higher rate expectations, in stark contrast to the earlier question as to whether UK rates would go negative. 

First and foremost, the pound has recovered from 10-day lows which were made when the markets got behind the greenback on Wednesday following hawkish comments from a top Federal Reserve official and traders preparing for inflation data this Friday.

It should be noted, however, that the pound has been the second best-performing G10 currency versus the dollar this year, up 3.3% year-to-date.

Investors are backing the pound and dominated assets on the back of expectations for a faster reopening for Britain's economy on the back of its rapid COVID-19 vaccination pace.

For instance, the UK is now into the third stage of its reopening which allows for indoor dining in pubs and restaurants. 

This bodes well for forthcoming economic data such as Retail Sales and the surveys of purchasing managers across industries and employment measures.

 The Bank of England will be tapering its bond-buying programme and the bond market is starting to price rate hikes into the currency.

Today, we have seen the UK bond market fall out of bed and UK yields sky rocket. The 10-year yield is currently 7.9% higher after rallying from a low of 0.7440% to a high of 0.8270%. 

This in turn has seen a bid in the pound which is currently trading at the highs of the day at 1.4207 vs the US dollar and 0.65% higher on the day so far. 

Sterling rose against the dollar on Thursday after a Bank of England policymaker,  Gertjan Vlieghe's comments. 

Vlieghe said that the central bank was likely to raise rates well into next year, while noting an increase could come earlier if the economy rebounds more quickly than expected.

"My central scenario is that the economy evolves similarly to the MPC's central projection in May, but with somewhat more slack than in the central projection," Vlieghe said in a lecture at the University of Bath.

"In that scenario, the first rise in bank rate is likely to become appropriate only well into next year, with some modest further tightening thereafter," he added.

However, it should be noted that Vlieghe will be departing the BoE's rate-setting committee this August.

Therefore, such comments are conditioned on a smooth transfer from the British government's furlough scheme.

Nevertheless, sterling also hit a six-day high against the euro, gaining 0.3% to 85.99 pence.

On the EU front, we heard from Jens Weidmann, a European Central Bank (ECB) Governing Council member and Bundesbank President, who said on Thursday, ''it is crucial to keep fiscal support measures targeted and limited in time; crucial to put public finances back on a solid footing after pandemic,"

"It must be clear to everyone that we are not putting monetary policy at the service of fiscal policy," Weidmann added. "The current high level of government intervention in the economy is justifiable in a crisis situation but should not become the new normal."  

On the data front, there was a disappointment in soft June GfK Consumer Confidence.

Germany reported soft June GfK consumer confidence.  It came in at -7.0 vs. -5.2 expected and a revised -8.6 (was -8.8) in May.    

EUR/GBP technical analysis

As per the following chart analysis, the price is destined to a lower low and deeper test of the daily support as follows:

Weekly chart

Daily chart

Hourly chart

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

EUR/USD holds above 1.0700 after US inflation data

EUR/USD holds above 1.0700 after US inflation data

EUR/USD stays in the lower half of its daily range but continues to trade above 1.0700 in the early American session on Friday. The data from the US showed that the annual Core PCE Price Index declined to 4.9% in April as expected, making it difficult for the dollar to gather strength.

EUR/USD News

GBP/USD trades above 1.2600 as dollar struggles to find demand

GBP/USD trades above 1.2600 as dollar struggles to find demand

GBP/USD clings to daily gains above 1.2600 and remains on track to end the week in positive territory. The greenback struggles to attract investors after the data from the US showed that PCE inflation softened in April. 

GBP/USD News

Gold pulls away from daily highs, holds above $1,850

Gold pulls away from daily highs, holds above $1,850

Gold has lost its traction in the second half of the day on Friday and declined toward the $1,850 area. The benchmark 10-year US Treasury bond yield staged a modest rebound on the US PCE inflation data, not allowing XAU/USD to preserve its bullish momentum.

Gold News

Terra’s LUNA 2.0 support expands with Binance and Kraken welcoming the airdrop, here’s how you need to prepare

Terra’s LUNA 2.0 support expands with Binance and Kraken welcoming the airdrop, here’s how you need to prepare

Terra’s LUNA fork proposal has passed with 65.5% votes, Revival Plan 2 in action without algorithmic stablecoin UST. LUNA price could wipe out losses incurred by holders in the colossal crash of LUNC and UST. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Forex MAJORS

Cryptocurrencies

Signatures