The euro fell to a three-month low of 0.8723 against the British pound last week as investors raised long-term expectations for higher interest rates in the U.K., and the lack of decisive action by the European Central Bank may continue to weigh on the exchange rate as the outlook for growth and inflation falter.
[B]Currency Pair: [/B]EUR/GBP
[B]Chart: [/B]60 Min Charts
[B]Short-Term Bias: [/B]Flat
[B][U]Analysis[/U][/B]
The euro fell to a three-month low of 0.8723 against the British pound last week as investors raised long-term expectations for higher interest rates in the U.K., and the lack of decisive action by the European Central Bank may continue to weigh on the exchange rate as the outlook for growth and inflation falter. After reaching a low of 0.8233 on 11/28, the EUR/GBP surged to a high of 0.9805 in December as the Bank of England took unprecedented steps to stimulate the ailing economy however, as the MPC puts a floor on the exchange rate, expectations for a rate hike over the next 12 months may continue to drive the exchange rate lower, and we may see the pair continue to retrace the advance from late November. Over the next few hours of trading, the euro-pound is likely to fall lower as the final GDP reading for Germany is expected to reinforce a dour outlook for the region, and speculation for further easing by the European Central Bank next month could lead the pair to fall back below the 120 SMA to test last week’s low for short-term support. At the same time, a break below 0.8723 may lead the pair to fall towards the 200-Day SMA for the first time since November. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
[I]To contact the author of this article, please email: <[email protected]>[/I]
[B][I][I] Related Articles:[/I][/I][/B]
[B][I][I]FX Technical Weekly [/I][/I][/B]
[I][B]Risk Appetite and Carry Interest Stalled by Long-Term Concerns[/B][/I]
[I][B]Long-Term Technicals May Offset Unusual EUR/NZD Price Action[/B][/I]