EUR / GBP falls below 0.8450 to new 19-month lows

• The euro extends the slide below 0.8450 to explore yearly lows near 0.8400.
• Risk appetite and tightening expectations from the Bank of England are underpinning the pound’s rally.
• EUR / GBP: Below 0.8450, the pair could dip to 08281/39 – Credit Suisse.

The EURO has extended its slide against a firmer British pound on Friday, breaking below the 0.8450 level for the first time since February 2020, to hit fresh lows at 0.8425 so far. The common currency has accelerated its decline this week and is expected to post its third consecutive weekly decline.

Risk Appetite, BoE Aggressive Stance Boosts Sterling

The British pound has been trading strongly in recent days, and the market anticipates that the Bank of England will lead the world’s major central banks and raise rates early next year. Escalating energy prices have pushed consumer prices well above the Bank of England’s target for price stability and some Bank officials, including Governor Andrew Bailey, have openly suggested the need to take some measures to address inflationary pressures.

Additionally, a spike in risk, caused by optimistic quarterly earnings from the financial sector, has led to substantial gains in the world’s major stock indices, easing concerns about inflation and supply chain bottlenecks. This has boosted the pound against the US dollar, increasing downward pressure on the euro.

EUR / GBP: Confirmation below 0.8437 could send the pair towards 0.8239 – Credit Suisse

Credit Suisse’s currency analysis team warns of a bearish confirmation below 0.8449 / 37: “While we would again look for a new hold at 0.8449 / 37 and swing higher in the channel, a sustained move below 0.8437 would mark a acceleration in downtrend, then exposing key 2019 and 2020 lows at 0.8281 / 39 “.

Technical levels