- EUR/GBP has been rangebound between 0.8550 and 0.8580 parameters for most of the last 48 hours.
- Looking ahead, Thursday’s ECB meeting and Friday’s UK and Eurozone hard data could shake things up.
EUR/GBP has spent most of the past 48 hours meandering sideways between the 0.8550 and 0.8580 levels and is currently trading flat on the day close to 0.8560. Rangebound trade is unsurprising given a lack of pertinent Eurozone or UK-related fundamental catalysts so far this week.
Driving the day
The only news story of real note has been the fact that the EU is gearing up to take the UK to court over its recent unilateral actions to extend customs waivers between the mainland and Northern Ireland – markets seem for now to be looking at this story as political theatre rather than anything that will meaningfully damage future UK/EU trading relations.
Things are set to pick up for EUR/GBP before the end of the week, however; Thursday’s sees the ECB release its latest monetary policy decision and Friday sees the release of a large batch of hard data (monthly GDP, industrial production and trade) pertaining to the month of January out of the UK, as well as aggregate January Industrial Production figures out of the Eurozone. These economic events are likely to inject some life into the pair.
Note that many strategists remain bearish on EUR/GBP however and forecast that, over the next few session, a test of and break below recent lows just under 0.8540 remains a strong likelihood – The UK’s vaccine rollout continues to outperform the EU’s (and is set to accelerate further in the coming weeks), meaning a faster, more confident economic reopening is likely over the Summer followed by a faster, more aggressive economic recovery than seen in the EU. Meanwhile, the Bank of England is currently seen as more hawkish than the ECB, with the Governor of the latter this week touting his anti-negative interest rate stance and officials at the latter show much greater levels of concern regarding rising government bond yields (raising the scope for an acceleration of the pace of asset buying).
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