To learn more click here
Yesterday, the EUR/GBP cross rate hovered in a sideways consolidation pattern in the lower half of the 0.79 big figure. There were very few eco data in Europe and in the UK. So, trading was mostly technical in nature. The pair came close to the previous low (0.7950) around noon, but the level could not be regained. As was the case for EUR/USD, the EUR/GBP pair showed some intraday swings but without a clear trend. The appearance of Mr. Draghi before the EU parliament was also no game-changer. EUR/GBP closed the day at 79.30, little changed from the 0.7934 close on Friday evening.
The focus of the day was the Eurogroup meetings, and markets were expecting some sort of follow up or implementation of the EU Summit Bank Plan announced on June 29th, which was stipulated to go into effect on July 9th. The Eurogroup statement dealt with the immediate problems of Spain but ignored any immediate action to implement the EU plan weakening the euro.
Overnight, BRC like-for-like retail sales were reported up from 1.3% to 1.4% in June, but still failed to meet consensus expectations (2.0%). The RICS house price balance was also weaker than expected.
However, as was most often the case of late, poor UK eco data didn’t really hurt sterling. On the other hand, the euro ceded some ground across the board and this is weighing on the EUR/GBP cross rate, too.
Later today, UK calendar contains the Industrial/manufacturing production data, the UK May trade balance and the NIESR GDP estimate. The data are expected to confirm the poor economic momentum in the UK. However, quite a big negative deviation from consensus is probably needed to have any negative impact on sterling trading (against the euro). In addition, yesterday’s price action suggests that it won’t be easy for EUR/GBP to regain the 0.7950 barrier in a sustained way. For now, EUR/GBP trading is still dominated by a sell-on-upticks trading approach.
From a technical point of view, the EUR/GBP cross rate was recently captured in a consolidation pattern following a longstanding sell-off that started in February and ended Mid-May when the pair set a correction low at 0.7950. From there, a rebound/short squeeze kicked in. Continued trading above the 0.8100 area would call off the downside alert and improve the short-term picture. The pair tried several times to regain this area, but there were no follow-through gains.
Of late, we looked to sell into strength for return action to the 0.7950 range bottom. This first target has been met. Sustained trading below this level opens the way to the next high profile support, in the 0.77 area (Oct 2010 lows).