Deteriorating fundamentals paired with fears of a protracted downturn in the U.K. continued to drag on the British pound throughout the previous week, and the EUR/GBP may continue to trend higher ahead of the Bank of England interest rate decision this week 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]
Deteriorating fundamentals paired with fears of a protracted downturn in the U.K. continued to drag on the British pound throughout the previous week, and the EUR/GBP may continue to trend higher ahead of the Bank of England interest rate decision this week as investors weigh the outlook for future policy. After reaching a low of 0.7694 in October, the euro-pound advanced to a high of 0.9805 in December as the BoE cut the benchmark interest rate at a record pace to stimulate the ailing economy, and we may see the pair continue to retrace the sell-off from earlier this year as the central bank maintains a dovish policy stance going forward. However, as the MPC keeps a floor on the interest rate and expects an economic recovery later this year, investors anticipate policymakers to tighten policy over the next 12 months, and long-term expectations for higher borrowing costs could drive the British pound higher over the near-term. Over the next few hours of trading, we may see the EUR/GBP push higher as investor confidence in the Euro-Zone is projected to improve for the fourth consecutive month in July however, as the RSI approaches overbought territory, gains are likely to be capped, and we may see the pair work lower to fill-in the gap from the 120-SMA at 0.8545. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.
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