- The pound is affected by the climate of risk aversion.
- EUR / GBP improves the technical picture with Monday’s rally.
The EUR / GBP is having the largest daily rise in a month, driven against a backdrop of risk aversion across financial markets. The cross climbed to 0.8578, reaching the highest level since September 9 and remains close to the highs.
The tone in favor of the EUR / GBP remains supported by the weakness of the GBP / USD that operates below 1.3680, with a marked bearish trend. The sharp drop in stocks affects the pound. On Wall Street, the Dow Jones falls 1.55% and the Nasdaq yields 2.05%. In Europe, the London Stock Exchange index loses 0.92%, and is far from being one of the worst. The CAC 40 falls 2% and the DAX 2.40%.
This week, one of the key events for the EUR / GBP will be the meeting of the Bank of england, which will announce the decisions on Thursday. In any case, in the current context, the decision of the Fed Wednesday and what happens to the equity markets may be more decisive for the currency market, including the EUR / GBP.
The strong rise of the cross led the price to recover the 20-day moving average, and clearly break 0.8550. This implies that if it asserts itself at current levels, the short-term bias would be to the upside, opening the doors for a test at the key 0.8600 zone. Should it return below 0.8550, the pound would regain momentum. A close below 0.8500 would enable more lows.
Technical levels
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