- EUR / GBP witnessed strong selling for the fourth day in a row on Tuesday.
- Bank of England Governor Andrew Bailey downplays speculation about negative rates and boosts the British pound.
- A weaker USD benefits the common currency, which could help limit deeper losses in the EUR / GBP.
A sudden spike in demand for the British pound has dragged the EUR / GBP cross to lows of more than a week, just below the 0.8950 level, during the first half of the European session on Tuesday.
The cross has extended its recent sharp retracement from the 0.9085 region and has remained under some selling pressure for the fourth day in a row on Tuesday. The downward movement has accelerated further after Bank of England Governor Andrew Bailey downplayed speculation on negative rates.
Bailey said that there are many problems with negative interest rates and no country has used it at the “retail” end of the market financial. The Bank of England is working hard to determine if negative rates are practical and the outlook for interest rates depends on productivity growth, Bailey added.
Bailey has gone on to say that the impact of the latest lockdown due to the coronavirus appears less than that of spring last year and that your best guess is that fourth quarter GDP was flat or slightly negative. Not-so-pessimistic comments have provided a strong boost to the British pound and they have put pressure on the EUR / GBP cross.
On the other hand, the common currency has found some support in a softer tone around the US dollar. This could turn out to be the only factor that could offer some support to the EUR / GBP cross and help limit any further falls amid the absence of relevant economic publications.
However, the EUR / GBP cross has now approached monthly lows and some subsequent selling should pave the way for further weakness. The cross could become vulnerable and further accelerate the decline towards the round 0.8900 level.
EUR / GBP technical levels
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