- EUR / GBP is consolidating near 0.8700 after resistance was encountered at the 21 DMA.
- The pair has seen a choppy few days amid turmoil in global bond markets.
The EUR/GBP It is consolidating around the 0.8700 level, and sellers have been ahead of the pair’s 21-day moving average, which currently stands at 0.87316, at the start of the session. Having reached pips from its DMA of 21, that marks the closest the pair has been to this momentum indicator since the first trading week of the year.
Recent volatility in the pair, which has seen it swing between multi-month lows below 0.8540 as recently as Tuesday before reversing more than 150 pips to current levels, appears, for the most part, unrelated to developments. fundamental / macro and is most likely the result of recent machinations in global bond markets. If the bond market calms down (a big yes), then currency markets may return to trading on fundamentals that still appear to be largely favoring the British pound over the euro, given the UK’s comparatively better position relative to the pandemic (declining infection rates in the UK and much faster vaccine launch setting the stage for a quick economic reopening before summer, while European countries continue to consider tighter closures).
Performance of the day
The release of German Import Price Index data for January showed that import prices grew at a stronger rate than expected in January, although prices remain low year-on-year. Meanwhile, flash consumer price inflation figures for Spain and France, released at the start of European trade, were low, and the month-on-month CPI fell in both countries. The euro has ignored the data, however, with a much greater focus on what has been happening in the bond markets.
European government bond yields are retreating on Friday in tandem with their US counterparts, with French 10-year borrowing costs now back in negative territory in nominal terms. More criticism from ECB members is also likely to help bond yields fall again; Isabel Schnabel, a member of the ECB’s Governing Council, reiterated the line of other key ECB officials earlier in the week, saying that changes in nominal rates should be closely monitored, although she said that if the rise in nominal returns is The result of inflation expectations, this would be a positive sign (but in the EU, the increase in nominal returns is NOT mainly due to the increase in inflation expectations).
As for the fundamental developments related to the UK, things have mostly revolved around the Bank of England; Chief economist Andy Haldane came out with some pretty aggressive comments, saying there is a tangible risk that inflation will be harder to control than expected and require monetary authorities to act more assertively than what is currently trading in the markets. financial These aggressive comments don’t seem to have changed the sterling dial much, given Haldane’s aggressive credentials.
Technical Levels
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