The British pound continued to strengthen against the euro to retrace the advance from February, driven by long-term expectations for higher interest rates in the U.K., and the pair may continue to fall lower over the near-term as market participants weigh the outlook for future policy.
[B]Currency Pair:[/B] EUR/GBP
[B]Chart:[/B] 60 Min Charts
[B]Short-Term Bias:[/B] Flat
[B][U]Analysis[/U][/B]
The British pound continued to strengthen against the euro to retrace the advance from February, driven by long-term expectations for higher interest rates in the U.K., and the pair may continue to fall lower over the near-term as market participants weigh the outlook for future policy. 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 cut the benchmark interest rate at a record pace however, as Credit Sussie overnight index swaps show investors anticipate the central bank to hike rates over the next 12 months, expectations for higher borrowing costs could lead the pair to retrace the advance from the previous year throughout the year. Over the next few hours of trading, we may see the euro-pound trend lower to test 0.8637, the February low, for short-term support. At the same time, moves to the downside are likely to be capped as the RSI approaches oversold territory, and we may see the pair push higher to cover the gap from the 120-SMA. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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