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EUR/GBP: The pair is likely to decline on 01.03.2016

There have been several drivers of movement in the cross-pair EUR/GBP since December 2015. Since 3 December Euro has been rising in the market due to sales of European stocks caused by the disappointing monetary policy decisions of ECB. At the same time the pair EUR/GBP has grown till the end of February.

Strengthening in the pair EUR/GBP was accompanied by negative data on Eurozone and Great Britain and investors’ concern that the UK might exit EU. Recent European news continues to be negative. It became known that in February annual consumer price index in Eurozone was -0.2% against the forecast 0.0%. Consumer price index and consumer confidence index fell in February. Business activity index in the manufacturing and service sectors as well as economic sentiment index are going down.

On the other hand, the Pound received support due to the efforts of the British prime-minister, Mr. Cameron who has managed to obtain privileges for the UK from EU.

British economic situation is not simple. The Bank of England’s growth forecast of the national economy for 2016 and 2017 has been lowered to 2.2% and 2.4% respectively. The first increase in the interest rate can take place not earlier than mid 2017. However, the Bank of England has no plans to reduce interest rate.

At the same time, ECB is aimed at easing monetary policy in Eurozone. In January, the head of ECB Mario Draghi said that at the meeting in March the bank would re-evaluate and reconsider monetary policy.

Now, the pair GBP/USD has reached historic lows of the years 2000 and 2002. Earlier, from these lows the pair GBP/USD started the rise until the year of 2007. If the situation repeats, the Pound will go up from the current levels. After sorting out the problem with referendum the pair GBP/USD can go up in the medium-term.

The pair EUR/GBP has been in the upward correction since the beginning of December and now it has reached resistance level of 0.7800.

Both technical and fundamental data give ground for the decline in the pair EUR/GBP.



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