- Summary:
- What is the outlook of the EUR/GBP pair? We explain what to expect on the EUR to GBP pair ahead of the ECB decision.
The EUR/GBP dropped to an important support level on the daily chart as investors waited for the upcoming ECB and BOE decisions. It is also reacting to the recent vote of no confidence against Boris Johnson. The EUR to GBP pair is trading at 0.8500, which is about 1.36% below the highest level in May. On the other hand, it is about 3.52% above the lowest level last month.
The ECB will start its two-day meeting on Wednesday and deliver its decision on Thursday. Analysts expect the bank to leave interest rates unchanged and sound hawkish because of the soaring inflation. The bank will signal that it will hike interest rate by 0.25% in its July meeting. However, a surprise by Christine Lagarde cannot be ruled out. This surprise could include a rate hike this month.
The ECB is reacting to the ongoing inflation in the bloc. Recent data showed that inflation surged to a record high in the bloc while the unemployment rate declined to the lowest level on record. These are perfect conditions for tightening.
The EUR to GBP is also reacting to the upcoming decision by the BOE. While the UK economy is softening, analysts believe the bank will implement the fifth straight rate hike next week. The bank is still fighting inflation even as concerns of stagflation remain.
EUR to GBP forecast
Turning to the daily chart, we see that the EUR/GBP pair has declined in the past two straight days. The pair is trading at 0.8500, which is lower than last week’s high of 0.8587. However, a closer look shows that the pair is approaching the upper side of the descending channel shown in black. Further, it is still above the 25-day and 50-day moving averages.
Another notable thing is that the pair has formed a triple-top pattern. Therefore, there is a likelihood that the pair will continue the sell-off ahead of the ECB decision. The next key support level to watch will be at 0.8420. A move above 0.8531 will invalidate the bearish view.
