- The EUR/GBP rate will escalate on Friday after falling to 0.8400.
- The ECB’s soothing statements facilitate regain sentiment, but only slightly.
- The BoE’s interest rate call will come out next week, but no changes in interest rates are expected yet.
EUR/GBP fell to a fresh 22-month low on Friday, hitting 0.8400, before a slight rebound that continues to leave the pair at the bottom of an accelerating three-month decline from April highs above 0.8600. Political turmoil in Europe continues to weigh on the euro as France heads into two early elections on June 30 and July 7, and sterling investors remain bullish ahead of next week’s interest rate announcement from the Bank of England ( BoE).
European Central Bank (ECB) policymakers were cruising around on Friday, trying to serene market sentiment as the euro has been the weakest performer of all major currencies this week. French President Emmanuel Macron dissolved the French government and sent the country to early elections in an attempt to stop the rise of right-wing candidate Marine Le Pen, who won a stunning victory in the European Parliament elections.
With President Macron’s support evaporating from a population revolting at the ballot box against unpopular fiscal policies, Le Pen’s platform of steep tax cuts and a lowered retirement age has pushed a candidate who has lost three separate bids for the French presidency since 2012 to seek his fortune. number four. Financial markets have turned wary of financial stability amid political unrest in France, as populist vote-buying moves could mean a significant deficit for a key European Union member.
On the sterling front, GBP traders are getting used to a long wait for next week’s update of the UK Consumer Price Index (CPI), scheduled for Wednesday, followed by a novel interest rate call from the BoE next Thursday. The BoE’s Monetary Policy Committee (MPC) last voted seven to two to keep interest rate cuts at 5.25%, and while no change in interest rates is expected, investors will be keeping an eye out for further changes from “maintain” to “cut” votes.
EUR/GBP Technical Outlook
On Friday, the EUR/GBP rate fell to a fresh 22-month low, testing the 0.8400 level, before finding intraday technical support and rebounding to the 0.8440 area. Market momentum is heavily tilted towards the bearish side, with the pair down 1.2% from its June high near 0.8540.
The pair is on track to close in the red for a fifth consecutive week, with weakness dragging EUR/GBP into a high-to-low range of -2.85% in 2024. A bullish rebound to the 200-day exponential moving average (EMA ) at 0.8460 is likely to move back towards the low, with sellers definitely looking to push the pair back below the 0.8400 level.
