The gap between the fast growing UK economy and the tentative growth in the euro are gradually being reflected in the value of EUR/GBP, that dipped to the lowest levels seen since January, and reached a low of 0.8352. GBP/EUR is getting closer to 1.20.
The recent driver has been the upbeat release of the MPC meeting minutes in the UK, and this happens despite the tension towards the highly anticipated Fed decision. Can the move be significantly extended after the Fed makes its announcement?
Update:
Here’s how it looks on the daily chart:
The British Monetary Policy Committee sees the recovery as becoming more substantial and see a higher growth rate for Q3: 0.7%. In addition, it even began worrying about increases in house prices.
In the euro-zone, no important figure has been released, but the elections in Germany loom.
And most importantly for forex traders, the Fed is expected to announce a reduction in the pace of its monthly bond buys: QE tapering. The reaction for the dollar depends on the size of tapering and the intentions of the Fed regarding more tapering.
Each currency has a different positioning: the pound is at the strong end of the scale, while the euro is at the lower end.
For all the details towards the Fed: QE Tapering Preview: 5 Reasons, 6 Scenarios and 7 Potential Currency Reactions
The tension towards the decision has been limiting some of the movements in the markets in recent days as many traders prefer caution over action into the uncertainty. All this pressure could be released in the 24 hours after the announcement. While it is harder to forecast the direction of the dollar, this release of tension could release and extend current trends.
Will EUR/GBP continue falling after the Fed?
0.8350 serves as support, and it is followed by 0.8330, which was a temporary cap in January. The next line is 0.8270, which was a temporary bottom at the time. More serious support is at 0.8220.
On the topside, 0.84 is a round number that could slow a move upwards, and 0.8450 is already stronger support.
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