EUR / GBP rises from 20-month lows at 0.8400

• The EUR rises after hitting new lows at 0.8400.
• The pair remains weak, weighed down by the adjustment of expectations from the Bank of England.
• EUR / GBP: Attention to the 2019 low at 0.8239 – Commerzbank.

The euro has trimmed losses during Tuesday afternoon’s session in the US, returning to the previous range, just above 0.8420, after hitting fresh multi-month lows at 0.8400. However, from a broader perspective, the pair EUR/GBP it remains on the defensive, after having depreciated around 2.5% in October.

Expectations of an aggressive Bank of England are supporting the strength of the pound

The pound remains firmer against the European currency, supported by market expectations that the Bank of England will have to accelerate its monetary normalization plan. With annual inflation accelerating to levels almost twice the Bank’s objective for price stability, investors are beginning to price one interest rate in the first half of next year and likely others in the future.

On the other hand, the euro continues to be weighed down by the common opinion that the dovish stance will prevail at the ECB’s monetary policy meeting next Thursday. The Bank is expected to keep its bond purchase plan unchanged and the benchmark interest rate close to zero, despite persistently high inflation, to avoid creating tensions in some peripheral markets.

EUR / GBP: Attention to 2019 low at 0.8239 – Commerzbank

Karen Jones, Head of FICC Technical Analysis Research Team at Commerzbank expects the pair to resume its downtrend soon, heading towards 0.8239: “The EUR / GBP has tried and failed at the key nearby resistance at 0.8471, which represents the April 2021 and May 2019 low. This is a negative price action, and while we remain below the DMA of 55 at 0.8532, we remain negative for now (…) Attention is on the 2019 low of 0.8239 and the 200-month MA is at 0.8159 “.

Technical levels