- Summary:
- EURGBP pair stalled as Eurogroup members continued to disagree on how to fund the region as the coronavirus pandemic continues and recession is expected
The EURGBP pair was little changed today as the market waited for more information from Eurogroup ministers who are meeting. The meeting comes a day after key differences prevented the ministers from making a deal on coronavirus financing.
The differences are mostly between northern states like Netherlands and southern states like Spain and Italy. The southern states have suggested that the financing from the €500 billion European Stability Mechanism (ESM) have no conditions. This is mostly because these countries have been the most affected by the crisis. The northern states have insisted that these loans must have conditions, including fiscal reforms.
These divisions echoed those that happened in 2012 during the European debt crisis. At the time, the northern states advocated for strict austerity measures, which led to a debt crisis. Countries like Italy, Greece, and Spain have never recovered from the crisis.
The conditions in Europe are expected to deteriorate as the crisis continues. In a report yesterday, the German government predicted that the economy would drop by more than 10% in the second quarter. In another report today, analysts told FT that Spain’s economy would drop by more than 10% this year. Just last week, data from the social security showed that 800k people have already lost their jobs.
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EURGBP Technical Analysis
The EUR to GBP pair remained close to a four-week low as the market waited for news from the ongoing Eurogroup meetings. On the daily chart, the pair is between the narrow channel shown in black. The pair is also close to the 38.2% Fibonacci Retracement level. Therefore, a bearish trend could if it moves below the 38.2% retracement level. This will see the pair attempt to retest the 23.6% Fibonacci level at 0.8565. On the flipside, the pair may fail to pass the 38.2% support and move back higher.