EUR to GBP Rate Could Push Higher on Lagarde’s WEF Comments

Summary:
• The EUR to GBP rate could get some additional uplift from the comments of ECB Chair Lagarde in the WEF meeting in Davos.

The pairing of the Euro to GBP is trading lower this Wednesday, which snaps a winning streak that lasted two days as the Euro continues to get tailwinds from comments of ECB policymakers.

On Wednesday, 24 May, comments from the Chair of the European Central Bank (ECB), Christine Lagarde, at the World Economic Forum in Davos, Switzerland, pumped the Euro to a 0.84% gain. Lagarde is scheduled to participate in a panel discussion at the same event, and hawkish comments from her end could reverse the Euro’s losses on the day. 

The uptick seen in the EUR/GBP since mid-April stems from rising expectations of the ECB raising interest rates in its June meeting. Recent comments of ECB policymakers have fueled these expectations. Lagarde’s comments in the Davos meeting covertly implied a rate hike of up to 50 basis points, with more significant hikes to combat spiralling inflation worsened by the war at Europe’s doorsteps. The market expectations of the scale of the ECB’s interest rate adjustments will drive the EUR to GBP rate.

EUR to GBP Rate Outlook

The correction seen on the active daily candle follows the completion of the double bottom within the rising wedge pattern at 0.85961 (8 December and 11 May highs). This correction has violated the support at 0.85372 but appears to have stalled at the 0.85105 price pivot (31 March high and 6 May low). A bounce on this support retests 0.85372 and the 0.85961 price points, which are potential barriers to upside continuation towards 0.86610, where the rising wedge’s upper border is found. A clearance of this border invalidates the pattern and opens the door towards 0.87186. 

On the flip side, a breakdown of the 0.85105 support favours the expectation of the rising wedge as a bearish reversal pattern by opening the door towards the pattern’s lower border at 0.84883 (neckline of completed double bottom). A breakdown of this support and the wedge’s lower border will target completion of the measured move at 0.83681 (17 March and 2 May lows). The attainment of this harvest point requires a sequential breakdown of 0.84611, 0.84381 and 0.83932 (17 May low). 

EUR/GBP: Daily Chart