Dovish comments from BoE’s Saunders Send GBPUSD Lower
The EUR to GBP exchange rate is one of the cross pairs most active on the FX dashboard. It reflects the value of one currency in terms of another and the commercial flows between the European Union and the United Kingdom.
Recent political developments created plenty of volatility on the EUR to GBP pair. The Brexit vote in June 2016 still haunts traders, as the 2020 December deadline comes closer by the day. A deal or no-deal Brexit will strongly influence the GBP volatility and the EURGBP cross pair too.
The absence of the USD, the world’s reserve currency, from the EUR to GBP exchange rate makes it a cross pair. As any cross pair, it is valued by investors for offering the possibility to divest from the USD in terms of high volatility. For instance, the Average True Range (ATR) on crosses is much smaller than in the case of a major pair.
In light of the Brexit deadline at the end of the year, the EUR to GBP rate is one of the closest watched as its evolution highlights expectations for the type of Brexit. The pandemic surely did not help, and its evolution, from Italy to Spain and then to the United Kingdom, influenced the EURGBP exchange rate too.
The cross pair sits at important crossroads. After putting a double bottom at the start of the year, it rose dramatically to over 0.94 as financial markets reacted to the coronavirus health crisis.
News out of Europe that large fiscal stimulus is on the table and that joint debt will be issued for the first time in the European Union history, sent Euro higher across the dashboard. The EUR to GBP was only one of the pairs benefiting from the funds pouring into the common currency.
In the last three months, the EUR to GBP exchange rate moved slowly in a rising channel. It kept posting higher highs and higher lows, typical for a rising market. However, the pair recently broke the lower edge of the channel and now threatens to make a new higher high.
Failing to do so will confirm the bearish breakout, opening the gates for a move back to the start of the rising channel. For this to happen, 0.9157 highs must hold.
