- Summary:
- The EURGBP pair rose today as investors reacted to a sudden decrease in UK house prices. The pair is also reacting to better Italian industrial data
The EUR to GBP (EURGBP) pair is up by more than 50 basis points today as the euro accelerates its rally. The euro index, which measures the strength of the euro, compared with its peer currencies rose by 0.20%.
British pound falls as house price plunge
The EURGBP pair rose partly because of a surprise decline in house prices. According to the Royal Institution of Chartered Surveyors (RICS), house prices dropped by -32% in May, its lowest level in 10 years. This decline was worse than the expected decline of -24% and the previous decrease of -22%. But, there are signs that the market has bottomed.
According to RICS, the expectations for house prices in the next 12 months were less negative. They now expect the price to drop by minus 5%. In fact, according to Zoopla, house sales in England had started to rebound. In a statement, Simon Rubinsohn of RICS said:
“Pre-Covid sales that were in the pipeline are now largely going through.”
The housing sector has been hit hard by the coronavirus pandemic. It has made many people pause their purchases and more people differ their purchases. With the unemployment rate surging, most people in the UK will not be thinking about house purchases in the near term.
Working in favour of house buyers is the Bank of England, which has reduced interest rates to historic lows.
EUR to GBP rises as Italian industrial production improves
The EURGBP pair also rose because of mixed industrial production data from Italy. As one of the worst-affected countries in Europe, Italy’s growth has slowed rapidly in recent months. Now, there are signs that the industrial sector is improving.
According to the statistics office, production declined by 19.1% in April. While this was bad, it was better than last month’s decline of 29.4 and the expected decline of 24%.
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EURGBP technical outlook
The EUR to GBP pair rose to an intraday high of 0.8968, which is slightly below this last week’s highb of 0.9053. On the four-hour chart, the price is still above the 50-day and 100-day exponential moving averages. It is slightly below the 61.8% Fibonacci retracement level. The EURGBP pair will continue rising so long as the price is above the 100-day EMA.
A move below the 100-day EMA and the lower side of the support will mean that there are more bears in the market, who will want to push the price to the first support at the 38.2% retracement at 0.8745.