News

EUR/GBP appears susceptible below 0.8500, which is close to two-month lows.

  • 07 October, 2021
  • 3:45 pm EEST

EUR/GBP appears susceptible below 0.8500, which is close to two-month lows.

  • EUR/GBP witnessed fresh selling on Thursday and dropped to near two-month lows.
  • Signs of easing fuel crisis in the UK boosted the sterling and exerted some pressure.
  • Dovish sounding ECB minutes undermined the euro and contributed to the downfall.

During the mid-European session, the EUR/GBP cross fell to around two-month lows, with bears hoping to extend the slide below the crucial psychological level of 0.8500.

Following the previous day’s brief halt, the EUR/GBP cross encountered some new supply on Thursday and appears poised to extend its recent rejection fall from the 200-day SMA — levels just above the mid-0.8600s. The British pound’s relative outperformance comes despite signals that the country’s fuel problem is resolving, putting downward pressure on the cross.

This, to a greater extent, helped to offset dovish comments from the Bank of England’s (BoE) chief economist, Huw Pill, who expects interest rates to remain low for the foreseeable future. Pill also stated that the current inflationary pressures appear to be more durable than anticipated, and that the Bank of England intends to unwind its stock of asset acquisitions in the most efficient manner feasible.

A slight US dollar decline, on the other hand, provided some support for the common currency, however a more dovish ECB Monetary Policy Meeting Accounts kept any major gains at bay. According to the minutes, the near-term increase in inflation does not necessitate policy tightening, and policymakers believe that the accommodative monetary policy stance is still necessary.

Nonetheless, the EUR/GBP cross traded with a bearish bias for the sixth session in a row, and acceptance below the 0.8500 level bodes well for further losses. As a result, a following drop towards the 0.8465 intermediate support, en route to August swing lows in the mid-0.8400s, remains a clear possibility in the absence of any markedly shifting economic data.

 

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