The cross EURGBP rallied more than 10% the most since April 2017, now facing stiff resistance at 0.9150. Six out of seven-euro crosses trading higher on a monthly basis, led by EURAUD with 13%, followed by EURGBP 10.00% and EURCAD 9%. On the flip side, against CHF, the euro is trading marginally down.
Last week the pound was butchered after the BOE chopped the rate to 0.25% from 0.75%. The initial reaction was down, followed by a big bounce, and finally rested South. Emergency rates cut spread across the central banks with fiscal stimulus measures but are failed to show a positive impact on the markets. At its special meeting ending on 10 March 2020, the Monetary Policy Committee (MPC) voted unanimously to reduce Bank Rate by 50 basis points to 0.25%.
The MPC also voted unanimously for the Bank of England to introduce a new Term Funding scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves. The market reacted negatively to the Fed and BOE rate cuts.
- The Monetary Policy Committee voted unanimously to reduce Bank Rate by 50 basis points to 0.25%. And also, the Financial Policy Committee (FPC) has reduced the UK countercyclical capital buffer rate to 0% of banks’ exposures to UK borrowers with immediate effect. The rate had been 1% and had been due to reach 2% by December 2020. The FPC expects to maintain the 0% rate for at least 12 months, so that any subsequent increase would not take effect until March 2022 at the earliest.
- Gross domestic product (GDP) showed no growth in January 2020, with growth in services offset by falls in production and construction, ONS reported. It Was flat even in the three months to January 2020 vs. 0.55% in Q3.
- Commenting on the latest GDP figures for the three months to January,
Head of GDP Rob Kent-Smith said, “The economy continued to show no growth overall in the latest three months. Growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars, and machinery industries.
“The dominant services sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment, and education.”
Data preview: Data wise UK unemployment grab some attention, but Covid 19 grabs the attention.
The higher trendline of the highs since 2017 is located between 0.9300-0.9330, this is the final resistance, and we start closing above it, then it would signal higher impulse towards 0.9800. Based on the size of the range, it would open upside risk to a move towards December 2018 highs. The daily RSI is extremely oversold, and the oscillator is remaining bearish, so a pause in the near term is coming.
If the price starts retracing, wait for 0.8940 and 0.8840 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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