EUR/GBP plunged on Friday, resuming the previous day’s sell-off. The UK economic data came in mixed at the end of last week. GDP increased by 2.3% versus 2.4% expected, while industrial production dropped unexpectedly by 1.3%, even if the specialists have expected a 1.2% growth, while the Manufacturing Production dropped by 0.3% versus 1.5% increase expected.
On the other hand, the Index of Services and the Goods Trade Balance have come in better than expected. On Monday, traders were paying attention have to the Eurozone industrial production.
The data has come in better than expected for April. Month-on-month seasonally-adjusted industrial production rose 0.8% That compares to 0.4% in the previous month and is conformation that the eurozone economy is growing as reopening spreads. Consensus analyst forecast for April was 0.4% growth, so the data was a major beat.
Eurozone industrial production was better than expected in April, official data published on Monday showed, as economies across the bloc started to reopen.
Eurostat said that year-on-year industrial production in the EU rocketed 39.3%, compared to just 11.5% growth in March and slightly lower at 38.7% for the whole bloc including countries not in the eurozone.
Not surprisingly then, EUR/GBP has been strengthening today
As you can see on the H4 chart, EUR/GBP moves somehow sideways within a triangle pattern. Now is almost to reach the triangle’s support, so we cannot exclude a temporary rebound.
It’s pressuring the 0.8575 static support, so we’ll have to wait to see how the rate reacts around these downside obstacles. Technically, the pressure is high after escaping from the ascending pitchfork’s body.
It has retested the broken lower median line (LML) and now it could approach the first warning line (WL1). A downside breakout from this triangle and through the S1 (0.8556) could announce a broader drop.
However, today’s data from Brussels may put those moves on hold, if not heralding a reversal.
EUR/GBP: Sterling pressured by EU protocol spat and Covid variant
Traders are worring about the souring relationship between the EU and London over the Northern Ireland protocol is probably positive buyers of the euro. Although talk of a trade war between the bloc and the UK seems far-fetched at this point, it cannot be ruled out.
If such a scenario was to come to pass, it is the EU that holds the trump cards, given the size of of its economy compared to the UK, and hugely important outstanding matter such as coming to an agreement on services, which includes the all-important financial sector.
Also the spreading of the Delta variant of the Covid virus is likely to set back. by a month the full reopening of the UK economy.
The euro is at the time of writing up 7 pips against sterling at €0.8588.
Bank of England (BoE) Governor Andrew Bailey is speaking this afternoon and sterling-watchers will looking for clues on his stance on monetary policy to see if it is line with the MPC’s doveish approach. He speak to the Association of Treasurers at 14:00 today.
Tomorrow another important speech is being made by the governor on Tuesday at 13:15 on the future of UK-based financial services.
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