EUR /GBP : The euro rose upstream from the ECB

The single currency is gaining momentum compared to its main counterparts in the short term after falling to historically low levels against the dollar and the franc last week. The single currency may benefit from a buyout with a fair score, as well as from recent comments by Fed governors who hinted that a rate hike of 100 basis points is not being discussed. Indeed, Atlanta Fed Chairman Rafael Bostic on Friday issued a call for the institution not to raise rates "too sharply," repeating yesterday's comments by very belligerent governors Christopher Waller and James Bullard, who spoke in favor of raising the rate. 75 bps at the next meeting in ten days.

The euro is also benefiting from the idea of the ECB raising rates by 50 basis points this Thursday, while operators have so far expected a 25-point hike. A 25-point rate hike is still the main scenario, but a higher increase would not be surprising, given that most central banks have been surprised in this way in recent weeks.

EUR/GBP is also supported by political uncertainty in the UK after the resignation of Boris Johnson. Former Chancellor of the British chessboard Rishi Sunak is leading after the third round of the race for the leadership of the Conservative Party. The last rounds of voting will take place today and Wednesday, after which the last two candidates will be nominated, but the decision on who will take Boris Johnson's place will not be made public until September 5.

Daily chart of the euro / pound sterling exchange rate-key levels
EUR/GBPSource exchange rate Forecast : PRT Charts
The euro/pound rate may rise to 0.87, but the ECB will be decisive
From the point of view of technical analysis, the prospects for EUR/GBP become bullish again in the short term due to the rebound at the level of 0.8450 USD and the moving average for 200 sessions. Prospects above these thresholds are bullish, the exchange rate may continue to rebound to its June high of 0.87, especially if the ECB surprises by announcing a 50bp rate hike.

These bullish prospects will be invalidated in the event of a decline below the moving average. In this case, one would expect a return to the lows of the year to 0.82, but this scenario seems unlikely even if the ECB raises rates by only 25 bps on Thursday.

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William Hunter

William Hunter 27 years old Born in London. Married with a child. Graduated in 2017 from the University of Cambridge, Economics course. Currently lives in Liverpool and works at the Bank of Liverpool.

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