The pound was outperformed against major currencies on Monday as the UK and the EU agreed the transition period. We maintain our bullish GBP view in the near term especially, against USD and JPY. Among other crosses, we are also bullish for GBPCHF and GBPNZD on the breakout, whereas the euro cross EURGBP locked in sideways.
BoE meeting (March 22): We expect that the key rates will remain unchanged, but the interest rate hikes could be delivered at the May meeting. We and the market are pricing a 25bps rate hike at the May meeting.
The euro cross was dived to 0.8745, but later recovered and closed at 0.8795 on Monday. The technical outlook has not been changed since couple could of weeks. The daily RSI and oscillator studies are remaining bearish. Based on these we forecast the euro will remain sideways this week as well.
We believe this week’s closing will be crucial for the euro cross. While holding at 0.8680 on a weekly basis, the price action will resume the near term rebound to 0.8850 and 0.8930. Alternatively, a weekly closing below 0.8680 could further retrace to 0.8600 and 0.8400 levels.
View: Bears need a close below 0.8680 (weekly basis)
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