EURGBP Market Outlook
Against the backdrop of the wobble in equity markets and the deflationary threat of falling crude price, The BOE’s Monetary Policy Committee (MPC) met earlier this week, with its monetary policy mandate in mind – balancing the 2% inflation target with the need to sustain growth and employment. At its meeting ending on 13 January 2016, the MPC voted by a majority of 8-1 to hold the Key Central Bank Rate unchanged at 0.5%. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion, and so to re-invest the £8.4 billion of cash flows associated with the redemption of the January 2016 gilt held in the Asset Purchase Facility.
Looking across the river, we see a different picture,however. Some members of the ECB’s policy-setting governing council supported a bigger cut in one of the central bank’s key interest rates at its most recent meeting, indicating that there was some interest in the council in taking a more accommodative policy stance. The comments from the published minutes of the ECB’s meeting on 3rd December,2015 suggest a nuanced discussion on the controversial decisions the council took on that day. So the minutes may bolster the case for more accommodation down the road.
So while the ECB seems to be dovish and flexible, and considering further rate cuts to European Rates, The BOE’s MPC seems to be aligning towards unanimity in maintaining the current key rate levels for the Sterling.
EURGBP has been in a strong rally since 17th November,2015. On the daily charts, currently EURGBP is at the top of upward sloping channel. So now the question is, will this rally resume or will see a trend reversal at this point? We got a nice rejection candle on the daily charts after yesterday’s close. So there is a high probability of seeing a trend reversal in the EURGBP. Having said that, this scenario will be invalidated if the price could break above 0.7606 .
Sell below 0.7530 with Stop Loss @0.7560 and Take Profit @0.7430.
Buy above 0.7610 with Stop Loss @.7540 and Take Profit @0.7685.