EUR / GBP within a range near the 0.8900 level

• EUR / GBP is moving slightly higher on Tuesday, focusing more on US fundamentals.
• The pair has moved into a range near the 0.8900 level as the bears continue to target a key support at 0.8850.

He EUR/GBP has moved slightly higher on Tuesday, focusing more on American fundamentals (the testimony before Congress of the candidate for Secretary of the Treasury of the United States, Janet Yellen) as opposed to fundamental European issues. The pair has hovered around the 0.8900 level, with bears still targeting a test of the key support at 0.8850.

Situation of the euro zone

Helping the euro there is news that suggests that the Italian prime minister, Giuseppe Conte, is close to securing a majority in the Senate before a vote of confidence on his government. He needs to secure 161 votes to guarantee a majority and is currently reported to have around 156/157 votes, but this could be enough if the 18 members of the Viva Italia Party (who triggered the crisis facing the government by withdrawing from the coalition on the disagreements about how to spend the money from the EU Recovery Fund) abstains. The latest news suggests that they will. As minimum, it seems unlikely that elections will be held at this timeas most Italian political parties prefer not to hold elections amid the pandemic and before EU bailout funds are allocated.

In other news, Germany has co-signed that it will extend its current lockdown restrictions until at least February 14., as indicated over the weekend. Meanwhile, the member of the ECB’s governing council, Mario Centeno, has spoken of the need to expand the international role of the euro, but noted that the eurozone will face a significant challenge in doing so. Finally, the reaction to the release of stronger-than-expected German ZEW figures for January had limited impact.

UK News

The latest daily Covid-19 statistics in the UK were mixed. On the one hand, cases increased by 33,355, a decrease and a decline from more than 70,000 new cases just over a week ago. The rapid drop in the infection rate shows that the latest lockdown is working, or at least after reuniting with family and friends over Christmas (which contributed to the spike to more than 70,000 cases per day), the nation has dramatically reduced your number of social contacts. However, 1,610 were reported to have died after testing positive for Covid-19 in the past 28 days, a new daily record number that suggests, when it comes to hospitals, the worst is far from over.

Meanwhile, according to government sources, Senior officials are realizing that strict restrictions are likely to remain in large UK cities, perhaps even in May, given the high level of infections. Much depends on what happens to the death rate in the coming weeks as more and more vulnerable people in the UK get vaccinated. Most analysts assume that there will be a rapid drop in the death rate as those most likely to die gain immunity. As the death rate falls, it is likely that policymakers will have a harder time justifying why strict lockdowns should be maintained. Given its leadership in vaccination, the UK is likely still able to fully open up earlier than the other developed markets.

On the other hand, Bank of England chief economist Andy Haldane has sounded quite aggressive, as is often the case. Haldane has said that QE is a temporary action to keep borrowing costs low and that the UK does not need higher inflation that would cause an increase in borrowing costs.

EUR / GBP technical levels