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GBP/EUR Pair Rises Ahead of Easter Weekend

GBP/USD
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March 27, 2016 By: , No Comments

Currency Markets Show Bullish Trends for the GBP/EUR Pair

The GBP/EUR currency pair is trading at 1.2657, which is remarkably weak for the sterling given that it was trading as high as 1.4325 in November 2015. The precipitous decline in the value of the GBP versus the EUR and other major global currencies is directly attributed to the volatility in currency markets. There is a great degree of anxiety about the possibility of a Brexit on June 23, 2016. Added to that were concerns about the twin terror attacks in Brussels, Belgium last week that left dozens dead and hundreds injured. Currency traders pulled their funds from the European economic area and sought safe-haven status in the GBP, and the USD. We have seen a slight resurgence in the strength of the GBP since February 24, 2016. Back then, the sterling had dropped to 1.2610 against the EUR, and it is recovered to a degree to trade at its current level of 1.2658. At the current exchange rate level, the support levels for the EUR/GBP pair are as follows:

  • Support level 1 – 0.7705
  • Support level 2 – 0.7567
  • Support level 3 – 0.7455

In terms of resistance levels, we have the following to consider for the EUR/GBP currency pair:

  • Resistance level 1 – 0.7966
  • Resistance level 2 – 0.8034
  • Resistance level 3 – 0.8158

 

Major Changes in the Dynamic with the GBP/EUR Currency Pair

It is interesting to point out that the GBP is not the victim of negative sentiment across the board any longer. The EUR has come in for some serious tap of late, especially after the twin terror attacks in Brussels, Belgium and the manhunt for terrorists that took place across Belgium and France. Just ahead of the Easter weekend (UK markets were closed on Easter Friday and Easter Monday), the GBP/EUR currency cross pair conversion rate strengthened. Analysts are of the opinion that the bearishness on the GBP is unwarranted and overdone.

Many believe that the possibility of a British exit from the European Union – the now notorious Brexit – has received undue attention in the media and is unlikely to occur given the strong sentiment for a no-vote in the UK. Despite protestations to the contrary, the London Mayor and advocates like Iain Duncan Smith (IDS) are unlikely to get the necessary backing they need from the populace in the UK for a Brexit. The June 23 referendum is fast approaching, but much of the momentum about it has lost a degree of traction with industry-leading analysts and brokers. That is not to say that as the time approaches currency fluctuations will not take place. However, there are issues that are substantially more urgent for the UK economy than the concept of a Brexit.

This main issue is the political hot potato that nobody wants to deal with – immigration. Even the world’s foremost authorities on Forex rates agree that the GBP is grossly undervalued against the EUR and the USD among others. In essence this means that the GBP has plenty of ‘smart money ‘riding on it’ for an appreciation to take place in the coming days and weeks. The risks that people foresee with this currency pair are largely related to the impact of a British exit on the GBP. Nobody knows quite yet how severely the British pound will be hit by a Brexit. The fact of the matter is that the European currency – the EUR – is equally at risk should Britain decide to leave the European Union.

 

ECB policies virtually guarantee a stronger GBP/EUR currency pair

For now, and times to come, spread betting traders will be looking carefully at the impact of the immigration debate leading to an outcome vis-à-vis Britain’s exit from the European Union. It is interesting to point out that there is significant downside bias in the GBP/USD currency pair with delivery in three months. That’s precisely the time that the June 23rd referendum will be taking place. This is likely being done as a form of hedging against further declines in the currency pair. But more importantly according to spread betters is the fact that the ECB adopted accommodative monitoring policies. This will prevent the EUR from appreciating relative to other currencies and ensure that the GBP gradually appreciates.

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