The euro cross has ended the session on a slight uptick, with the EURGBP closing above 50MA. The pound declined on Monday’s early Asia session before bouncing back across the board.
You might have heard divide talk over negative interest by BOE members. Last week Bank of England Chief Economist Andrew Haldane said, the BoE is examining negative interest rates. Whereas Bailey said that negative rates weren’t currently being planned for. This Monday, MPC member Tenreyro said that negative rates shouldn’t be ruled out.
Maybe you are wondering what a negative “interest rate is”. A negative Bank rate would mean the banks would be charged for keeping their money with the Central Bank overnight, rather than lending it out. During the current COVID-crisis, the Reserve Bank of New Zealand was the first central bank discussed regarding negative interest rates on its policy meeting last week.
Back in 2014, exactly on 12 June 2014, the ECB adopted the first negative interest rate policy. The ECB lowered its deposit rate to -0.10%, and now it is standing t -0.50%.
Coming back to Bank of England at its meeting ending on 6 May 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%, according to BoE. The MPC voted by a majority of 7-2 for the Bank of England to continue with the program of £200 billion of UK government bonds. Two members preferred to increase the target for the stock of asset purchases by an additional £100 billion at this meeting.
UK gross domestic product was estimated to have fallen by 2.0% in Quarter 1 (Jan to Mar) 2020, the largest fall since Quarter 4 (Oct to Dec) 2008, according to ONS. Services output decreased by 1.9% in Quarter 1 (Jan to Mar) 2020, the largest quarterly fall since records began. Production output fell by 2.1% in Quarter 1 2020, driven by declines in manufacturing.
Data preview: A busy week ahead that kicks off with March Labour market overview (Tue) April CPI (Wed) and Retail Sales (Fri).
The euro has regained upward momentum against the pound over the past week after breaking through 0.8860 level.
The erosion of an important threshold at 0.8860 is highly encouraging. The increase of the daily volatility and the buying oscillator signal suggests further upside potential. Whereas there will need to be a breakout above 0.8960 and 0.9000 levels to envisage an extension of the cross ascent towards 0.9100.
The support level is located at 0.8880 and 0.8815-0.8800 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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