EUR / GBP rises further towards the 0.8600 level

• The EUR / GBP has moved above its recent intraday trading range and is considering a test of 0.8600.
• The catalysts for the move are unclear, although there has been plenty of news to be aware of.

Midway through the European morning session, the EUR/GBP it experienced a buy attack that pushed it towards the 0.8600 level and out of its previous range of 0.8550-0.8580 that had persisted for the past few days. The pair is now testing the resistance offered by last week’s lows of 0.8595, as well as, of course, the psychological level of 0.8600. At the time of writing, EUR / GBP is trading around 30 pips or up 0.3% more on the day.

Performance of the day

There did not appear to be any specific catalyst behind the sudden buying attack during the European morning, with traders speculating that the move could have triggered a large buy order / ongoing program. Some suggested that a much stronger-than-expected euro zone industrial production figure for January could be behind the euro’s outperformance. For reference; YoY, the industrial production growth rate posted a surprising 0.1% expansion (versus expectations for a 2.4% decline), driven by a 0.8% faster-than-expected month-on-month production growth rate . ING comments that “they expect industrial production to continue to provide an important counterweight to the service sector, which is still suffering from restrictive measures to slow the spread of the coronavirus… (and) while we wait for GDP to contract in the first quarter, the strength of manufacturing will probably soften the blow. “

That compared to UK January industrial production figures in early European morning, which weren’t quite as strong; Industrial production fell at a faster-than-expected month-on-month rate of 1.5%, while manufacturing production was down 2.3% month-on-month. However, the UK GDP data for January was more positive; The UK economy performed better than expected in January, with economic activity declining just 2.9% month-on-month versus expectations of a steeper monthly decline of close to 5.0%. The mixed nature of the data, combined with the fact that it is quite retrospective, means that it was probably not behind the bullish movement of the EUR / GBP on Friday.

In fact, any optimism about the eurozone economy as a result of stronger industrial production figures should have been offset by a flow of negative news about the state of the pandemic; In France, the minister warned that the situation in Paris is particularly worrying, with an infection rate close to pre-second wave levels. Elsewhere, there is talk of a national shutdown in Italy over Easter and German health officials are talking about the fact that the country could be at the start of the third wave of covid-19.

On the other hand, ECB sources continue to leak details of the discussion at this week’s meeting to the press; There was reportedly some discussion about the impact that the newly approved US $ 1.9 trillion stimulus package would have on the eurozone economy. This week’s meeting was reportedly “contentious,” with the governors of richer countries and many manufacturing industries much more optimistic about the outlook for vaccines and the economy’s resilience. This comes after independent sources from the ECB suggested on Thursday that the ECB’s new PEPP monthly purchase target is likely to be less than $ 100 billion per month, but much higher than the $ 60 billion in asset purchases in February; recap that the ECB announced on Thursday it would significantly accelerate the rate at which it is buying bonds over the next quarter, although ECB President Christine Lagarde did not give any specific number on how much the bank would buy each month.

Technical levels