EUR/GBP rally capped at 0.8855; remains steady at two-month highs
- The Euro hits resistance at 0.8855 after rallying to fresh two-month highs.
- The Pound remains vulnerable on BoE's dovishness.
- EUR/GBP seen at 0.85 in one year time – Danske bank.
The Euro rally from 0.8800 seen on Tuesday’s European market session, has found resistance at 0.8855. The pair, however, remains steady at two-month highs, above 0.8830, with mid-October’s peak, at 08865 on sight.
The Pound, on the defensive on the back of a dovish BoE
The Sterling has remained on the back foot over the last few days, which has helped the Euro to appreciate nearly 3% over the last two weeks. The Bank of England delivered a “dovish hike” after their December monetary policy meeting, which has acted as a headwind for the GBP.
The bank slowed down the monetary tightening pace with a 0.5% hike and with two of the nine committee members voting to leave rates unchanged. This suggests that the bank’s normalization cycle might be approaching its end.
In a quiet post-Christmas market, with a thin macroeconomic docket, the euro is trading moderately higher, underpinned by a solid EUR/USD amid the softer tone of the US Dollar. News that China is planning to end quarantine for inbound travelers has boosted risk appetite, weighing demand for the safe-haven USD.
EUR/GBP seen lower over the coming months – Danske Bank
Looking forward, analysts at Danske Bank maintain a negative outlook on the pair: “We remain cautiously optimistic that the cross will head modestly lower as a global growth slowdown and the relative appeal of UK assets to investors are positive for GBP relative to EUR (…) Forecast: 0.87 (1M), 0.86 (3M), 0.85 (6M), 0.85 (12M).”
Technical levels to watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
