Long-term expectations for higher interest rates in the U.K. pushed the British pound higher against its currency counterparts throughout the month, and reached a fresh yearly high of 0.8482 against the euro in the previous week, and Cable may continue to appreciate over the near-term as investors 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]
Long-term expectations for higher interest rates in the U.K. pushed the British pound higher against its currency counterparts throughout the month, and reached a fresh yearly high of 0.8482 against the euro in the previous week, and Cable may continue to appreciate over the near-term as investors weigh the outlook for future policy. Credit Sussie overnight index swaps show market participants anticipate the Bank of England to tighten policy over the medium-term and expect the central bank to increase the benchmark interest rate by nearly 100bp over the next 12 months, and the pound may continue to strengthen against the euro as the ECB plans to carry out its EUR 60B covered bond purchase next month. After reaching a low of 0.7694 in October, the EUR/GBP surged to a high of 0.9805 in December as the Bank of England lowered the benchmark interest rate at a record pace however, as the BoE puts a floor on the interest rate and hold an improved outlook for future growth, the pair may continue to retrace the advance from the previous year. Over the next few hours of trading, we may continue to see the euro-pound test 0.8500-10 (61.8% Fib) for support, and push higher to cover the gap from the 120 moving average however, as the economic docket is expected to reinforce a weakening outlook for growth and inflation in the Euro-Zone, fundamental headwinds are likely to drag the pair lower over the week. 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]Forex Trading Weekly Forecast - 06.15.09[/B][/I]
[I][B]A Focus on Sentiment Makes for a Risk USDJPY Range[/B][/I]
[I][B]Australian Dollar Crosses Approach Important Resistance[/B][/I]