How are Market Participants Reacting to the GBP/EUR and the GBP/USD?
Key Currency Pairs and How Spread Betting Activity is Shaping Up
The GBP/USD currency pair is currently trading at 1.3205, down 0.24% or $0.003. For the year-to-date, this currency pair is down 10.40% after opening at 1.4738 on January 1, 2016. Over the past 3 months, the GBP/USD pair has depreciated by 7.76%, and over the past 1 month it has depreciated by 9.94%. Over the course of the past 5 days the GBP/USD pair has weakened by 1.04%. The 1-day performance of this currency pair is -0.21%. Recall that the GBP/USD currency pair has been one of the hardest hit in the FX arena. It has been subject to massive selloffs as a result of market volatility vis-a-vis the Brexit decision.
An interesting development has been taking place with the sterling and the euro, and it relates specifically to the Japanese yen. With traders adopting a risk-off approach to the GBP and the EUR, these currencies are being sold en masse. And since the Japanese yen is the go-to currency during times of economic volatility in Asia-Pacific and elsewhere, the yen has gained favour. We are seeing some interesting trends in terms of Japanese government bonds which have spiked and their yields have dropped accordingly. As traders sell sterling and euros, they are buying dollars and yen. The strength in government bonds is indicated by the high prices of these financial assets and the historically low yields being generated.
The GBP/EUR Currency Pair – An Entirely Different Ballgame?
The GBP/EUR currency pair is trading at 1.1995, down 0.1929% or €0.0023. The pair has a year-to-date performance of -11.62% after it started the year at 1.3572. The 3-month performance of the pair has been substantially better with declines of just 5.45%, while the 1-month performance has shown a strong retreat of -8.04%. The short-term perspective has been relatively stable in the aftermath of the Brexit decision. The past 5 trading days have recorded declines of 0.10%.
If we turn our attention to the support and resistance levels for the EUR/GBP pair, some interesting trends emerge. S1 is 0.8234, S2 is 0.8113, and S3 is 0.7928. In terms of resistance levels, R3 is 0.8762, R2 is 0.8641 and R1 is 0.8491. An important development which has affected this currency pair was the European Central Bank’s decision to keep interest rates on hold. The Governing Council of the ECB and the President, Mario Draghi decided that no changes would be made to the interest-rate in terms of refinancing operations, deposit facilities or marginal lending. The Governing Council remains committed to further quantitative easing measures at the next meeting scheduled for September 2016. Concerns remain about the impact of a Brexit on EU economic growth, and the President of the ECB anticipates that as much as 0.5% could be wiped off the performance of the Eurozone economy through 2019.
Spread betting activity on the long-term projections of the EUR/GBP pair have factored recent developments into the equation. There are concerns brewing about Italian banks and NPLs – non-performing loans and how they can affect the broader European economy. If bank recapitalisations are needed in Italy this will have an impact on the broader Eurozone. Nonetheless, structural reforms are needed to boost output and reduce unemployment in the Eurozone so the precarious situation remains.
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for spreadbettingreview.co.uk.