- Sterling sees bullishness following United Kingdom employment data.
- The EUR/GBP pair tests crucial support.
- The central banks exhibit divergent policies.
EUR/GBP responded to the United Kingdom data that exceeds expectations. Early on Tuesday, the Unemployment Rated and Claimant Count changed and noted impressive declines, catalyzing rallies in the British pound.
That saw EUR/GBP’s cross rate on aggressive fall. Besides the economic data standpoint, the pound’s massively oversold conditions lately fueled the sterling’s upsurge. For instance, GBP/USD traded near 1.20, losing over 1,500 pips this year. Indeed, the United States dollar’s strength catalyzed the move, but the weakness of the sterling contributed.
Today’s impressive employment data emerged after the Bank of England (BOE) warned about the escalating inflation. The bank added that it does not have all it takes to stop the rising inflation. BOE’s Governor told The Daily Telegraph that food inflation amid shortages caused by the Ukraine conflict will translate to uncontrolled inflation.
Massive Resistance Rejects EUR/GBP
EUR/GBP hovered beyond 0.86 before aggressive sell-offs emerged. This region has served as a massive resistance for the pair in the past, and it could not overcome it. For now, it threatens a downward move to hit the crucial support level at 0.83.
Meanwhile, EUR/GBP saw its exchange rate plummeting continuously since Brexit. The pair discovered a bottom near 0.83 in 2022, following declines by over 1K pips points. That came as investors offloaded the euro following United Kingdom’s European Union exit.
Also, the common currency plummeted low when the Ukrainian war began, and the case wasn’t different for EUR/GBP’s exchange rate. Lastly, the European Central Bank and the BOE boast divergence fiscal policies.
Meanwhile, the Bank of England increased interest rates and exhibited a hawkish stance. On the other side, the European Central Bank maintains QE and plans to alleviate rates in the summer. Remember, ECB hasn’t lifted rates for years.
For now, EUR/GBP seemed primed for lows once again. The crucial support stands at 0.8300, and a 24hr closing beneath the foothold would welcome further weakness. The fundamental stand reveals bearishness as the technical view. Also, EUR/GBP has its exchange rate bearish because of the gap between the bank’s financial policies.