EUR/GBP falls to 0.8700 on expectations of less hawkish ECB

Reacting to widespread market concerns over banking contagion, the EUR/GBP pair widens its losses. The mood on the market is starting to turn negative. The Euro is specifically penalized by this prior to the European Central Bank’s interest rate decision.

As the UK Finance Minister Jeremy Hunt revealed the new budget that would break Britain out of stagnation, EUR/GBP fell dramatically from the two-day highs of 0.8843. Hence, despite the impending European Central Bank (ECB) interest rate decision, the Pound Sterling (GBP) increases. The EUR/GBP exchange rate is currently trading at 0.8735, down by 0.93%.

Market attitude is still depressing. Credit Suisse (CS) fell 13% after one of its top holders said he would not make additional investments as a result of the failure of some banks in the United States (US), which has extended around the globe. Alarms have gone off all over Europe as a result, with markets anticipating a rate increase from the European Central Bank (ECB) of only 25 basis points, as World Interest Rates Probabilities (WIRP) had suggested.

According to official figures released on Wednesday by the Eurozone’s European Commission, industrial production rebounded in January. The study emphasized that manufacturing had improved. EU industrial output increased by 0.7% MoM, exceeding the previous reading of -1.3% and beating the estimate of 0.4%. Yearly based, increased 0.9%, beating expectations of 0.2%.

The most recent employment report in the UK was positive, with more people joining the labour force as a result of the economy and lower earnings. That lessened the pressure on the Bank of England (BoE) to raise rates despite a persistent slowdown in the economy.

Nonetheless, the UK’s budget came under the day’s attention. A strategy to quicken the speed of growth in the UK was unveiled by the Chancellor of the Exchequer, Jeremy Hunt, and it includes tax and childcare measures.

In addition to freezing the gasoline tax, Jeremy Hunt has revealed a plan to offer assistance to those dealing with high energy costs. The proposed measure will prevent the anticipated £500 increase in typical energy bills from taking effect next month, keeping annual costs for the typical household at about £1,138.

There is no economic docket for the UK. On Thursday, President Christine Lagarde will hold a press conference after the European Central Bank (ECB) announces its monetary policy decision.

After reaching a peak last week at about 0.8925, the EUR/GBP reversed course. The cross also deviated from the 20, 50, and 100-day Exponential Moving Averages (EMAs), which accelerated a decline to test the 200-day EMA at 0.8701. The EUR/GBP tried to test the YTD lows at 0.8718, but it fell short of doing so. Oscillators have shifted to the downside, making a bearish continuation of the EUR/GBP the easiest course of action.

Hence, the 200-day EMA at 0.8701 would be the next support level for the EUR/GBP, followed by 0.8718. The pair would be moving in the direction of the low from December 13 at 0.8558 once those levels are cleared.