EUR/GBP reaches levels above 0.8900 for the first time since January 2020

• The pound falls across the board on Friday.
• EUR/GBP is having the best day since March 2020.

After a brief pushback, the EUR/GBP resumed the bullish path and reached levels above 0.8900 for the first time since 2020. So far, the cross has reached a maximum of 0.8910. It is hovering around 0.8900, up 170 points on the day, the best performance since March 2020. A sharp drop in the pound and risk aversion are fueling the move.

Rate hike doesn’t help GBP

On Thursday, the Bank of England raised the key interest rate by half a percentage point to 2.25%. On Friday, the British government announced a huge package of tax cuts. The measures did not offer any real support for the pound. Also, UK bonds slump on Friday.

“The implication is that the deteriorating budget deficit and the persistent and likely deterioration in the current account will weigh negatively on the GBP. In this environment, rising rates and favorable interest rate spreads are not supportive of the GBP right now.With risk sentiment and global growth prospects worsening, the market may have to consider how unimportant a move towards parity may be for GBPUSD.Meanwhile, the euro seems better placed, for now, against the pound. The move above 0.88 sets the stage for a new limit range at 0.90/0.92,” warned analysts at TD Securities.

Another weekly gain

EUR/GBP is about to record the eighth consecutive weekly gain. At first it was a hawkish European Central Bank and now it is a weak pound that is driving the cross higher. The weekly close will be the highest since January 2020. The 0.8900/10 zone is strong resistance and a consolidation above could point to further gains even amid overbought conditions. At the moment there are no signs of stabilization or correction.

Technical levels