EUR/GBP is struggling to maintain the corrective retreat that has been under pressure recently.
Virus problems appear to be overlooked, since BOE appears to be more hopeful than ECB.
German retail sales, ECB’s Lagarde, and the UK PMI are all being watched.
EUR/GBP loses its early Asian bounce, falling to 0.8575 ahead of Thursday’s London open. The cross-currency pair reflects traders’ hesitation in the face of the UK’s coronavirus (COVID-19) troubles and the Bank of England’s (BOE) confidence, not to mention mixed Brexit developments. The lack of momentum in the quote could be attributed to mixed data from the Eurozone and the United Kingdom, as well as cautious attitude ahead of another batch of data releases.
Although the highest covid daily infections in 2021 will put the UK’s economic recovery to the test, Andy Haldane, the BOE’s outgoing policymaker, remains positive about inflation and supports tapering. On the other hand, Francois Villeroy de Galhau, a member of the European Central Bank’s (ECB) Governing Council and the head of the Bank of France, sounded wary because the bloc’s inflation data remain considerably below the targets.
The European Union’s (EU) formal three-month extensions on British sausage sales in Northern Ireland (NI) and the Belfast court’s support for the NI protocol add to the British pound’s strength (GBP). In a similar vein, the agreement between Germany and the United Kingdom on post-Brexit defense and foreign policy declarations adds to sterling’s advances.
Aside from that, the market’s sentiment is still split, with little hope of reversing the downward trend. Stock futures are moderately bid, but Treasury yields are still firm, calming the optimists.
Moving on, German Retail Sales, which are predicted to grow by 10.1 percent YoY vs 4.4 percent last year, may test the pair sellers’ ability to match estimates. The UK PMIs, on the other hand, should show a downward trend, and ECB President Christine Lagarde does not need to sound too hawkish to keep the EUR afloat. GBP appears to be on the upswing. Furthermore, BOE Governor Andrew Bailey is scheduled to give a speech, and he may reaffirm his positive stance, putting pressure on the pair.
EUR/GBP bears are encouraged by a five-week-old declining trend channel./n
