EUR/GBP ticks up from 20-month lows at 0.8400

The euro has trimmed losses during Tuesday’s afternoon US session, returning to the previous range, right above 0.8420, after having hit fresh multi-month lows at 0.8400. From a wider perspective, however, the pair remains on the defensive, after having depreciated about 2.5% in October.

Expectations of a hawkish BoE are underpinning Pound’s strength

The pound remains firmer against the European currency, supported by market expectations the Bank of England will have to accelerate its monetary normalization plan. With yearly inflation accelerating at levels nearly twice the Bank’s target for price stability, investors are starting to price an interest rate in the first half of next year and, probably, others to follow.

On the other hand, the euro remains weighed by the common view that the dovish stance will prevail at the next Thursday’s ECB monetary policy meeting. The Bank is widely expected to maintain its bond-purchasing plan unchanged and the benchmark interest rate near zero, in spite of the persistently high inflation, to avoid creating tensions in some peripheral markets.

EUR/GBP: Attention to the 2019 low at 0.8239 – Commerzbank

Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank expects the pair to resume its downward trend soon, heading towards 0.8239: “EUR/GBP has tested and failed at key nearby resistance at 0.8471, which represents April 2021 low and May 2019. This is negative price action, and while we hold below the 55-DMA at 0.8532 we stay negative for now (…) Attention is on the 0.8239 2019 low and the 200-month ma lies at 0.8159.” 

Technical levels to watch