HomeContributorsFundamental AnalysisInstrument of the Week (June 17—21): EURGBP Overview

Instrument of the Week (June 17—21): EURGBP Overview

The EURGBP pair, representing the exchange rate between the Euro and the British Pound, encapsulates the economic dynamics of the Eurozone and the United Kingdom. The Euro is influenced by economic growth, inflation, and the monetary policies of the European Central Bank, primarily driven by major economies like Germany and France. On the other hand, the British Pound is affected by the UK’s economic indicators, such as GDP growth, inflation, and decisions made by the Bank of England.

Eurozone Consumer Price Index (CPI) YoY, June 18, 11:00 (GMT+2)

The forecast for the Eurozone’s CPI suggests an increase of 2.6% from the previous 2.4%. If the actual CPI data exceeds this forecast, indicating higher-than-expected inflation, it might prompt the European Central Bank to consider tightening its monetary policy sooner than anticipated. This prospect would likely bolster the Euro, causing the EURGBP pair to rise. Conversely, should the CPI fall short of expectations, suggesting less inflationary pressure than anticipated, it could weaken the Euro as investors adjust their expectations for continued accommodative policy. In this case, the EURGBP rate could potentially decrease.

UK Consumer Price Index (CPI) YoY, June 19, 08:00 (GMT+2)

In the UK, the CPI is expected to decline to 1.9% from the previous rate of 2.3%. If the released data confirms the forecast and shows a decrease, it might reduce the urgency for the Bank of England to tighten monetary policy, leading to a weaker Pound. This weakening would likely cause an increase in the EURGBP rate. However, if the actual CPI data comes in higher than expected, suggesting persistent inflationary pressures, it could push the Bank of England towards a more aggressive monetary stance, thereby strengthening the Pound and likely causing a decrease in the EURGBP exchange rate.

In the daily timeframe, EURGBP, in a long-term bearish trend, has formed a descending channel pattern. The price fell to the lower trend line, and it is testing it. The moving averages show a clear bearish signal, but the RSI is at 30.0, which creates two possible scenarios:

  • If EURGBP breaks the lower trend line and falls below 0.8430, the price will fall to 0.8300;
  • A rebound from the trend line will open the way for a rise to the upper trend line of 0.8550.

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