EUR/GBP expected to edge higher over coming months

The EUR/GBP pair has paid little attention to the news related to Northern Ireland this week although, this week’s news provides a glimmer of hope for the outlook regarding the Northern protocol and consequently for an improvement in investor sentiment, as the factors impacting the UK economic backdrop remains sour.

The EUR/GBP is rising for the second day in a row, after recording the lowest level in two weeks, on Monday. The pair climbed from 0.8769 and peaked on Tuesday at 0.8846, supported by a stronger Euro across the board.

The Euro is up versus the Pound and the Swiss Franc on Tuesday’s trading. Higher Eurozone bond yields are helping the common currency. The German 10-year bond yield stands at 2.29% the highest in two days up 2.75% for the day.

European Central Bank officials expressed a hawkish tone while in the UK, concerns about the health of the economy remain intact. UK fundamentals are on debate at the Bank of England’s Monetary Policy Committee.

As UK fundamental factors remain characterized by recession, high inflation, low investment growth and weak productivity we continue to expect EUR/GBP to edge towards 0.90 on a 6 to 9 month view. Economists are intended to continue watching developments surrounding the protocol closely.

The pair was able to hold above the 20-day Simple Moving Average (today at 0.8785). The upside remains limited by the critical resistance area of 0.8850. A daily close well above 0.8850 should open the doors to more gains in the short-term.