- EUR/GBP turns lower for the fifth straight day and drops to over a one-week low on Monday.
- UK government withdraws tax cut plan, which boosts sterling and exerts pressure on the cross.
- Recession fears, modest USD strength weighs on the euro and contributes to the offered tone.
The EUR/GBP cross attracts fresh selling following an early uptick to the 0.8830 region and turns lower for the fifth successive day on Monday. Spot prices drop to over a one-week low during the mid-European session, with bears now awaiting sustained weakness below the 0.8700 round-figure mark.
UK Finance minister Kwasi Kwarteng takes a U-turn on Monday and confirms that his government will not go ahead with a plan to cut the top rate of income tax from 45%. This, in turn, is seen as a key factor behind the British pound's relative outperformance against its European counterpart and exerting downward pressure on the EUR/GBP cross.
The shared currency, on the other hand, is undermined by speculation of a potential recession in the region amid the risk of a further escalation in the Russia-Ukraine conflict. This, along with a modest US dollar strength, weighs on the euro and contributes to the offered tone surrounding the EUR/GBP cross, supporting prospects for further losses.
That said, a bleak outlook for the UK economy might hold back the GBP bulls from placing aggressive bets and lend some support to the EUR/GBP cross, at least for the time being. Nevertheless, spot prices have retreated over 500 pips from a two-year high, around the 0.9235 region touched in September and seem vulnerable to prolonging the descending trend.
Technical levels to watch
|Today last price||0.8709|
|Today Daily Change||-0.0069|
|Today Daily Change %||-0.79|
|Today daily open||0.8778|
|Previous Daily High||0.885|
|Previous Daily Low||0.8752|
|Previous Weekly High||0.9254|
|Previous Weekly Low||0.8752|
|Previous Monthly High||0.9254|
|Previous Monthly Low||0.8566|
|Daily Fibonacci 38.2%||0.879|
|Daily Fibonacci 61.8%||0.8813|
|Daily Pivot Point S1||0.8737|
|Daily Pivot Point S2||0.8695|
|Daily Pivot Point S3||0.8639|
|Daily Pivot Point R1||0.8835|
|Daily Pivot Point R2||0.8892|
|Daily Pivot Point R3||0.8933|
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