EURGBP Set to Test the Lows Again Ahead of ECB Rates

The EURGBP exchange rate is flat in early trading on Friday, but the pair touched the 0.8600 level yesterday for the first time since last week. Next week will see the European Central Bank announce its latest interest rate policy and we may see a bottom emerge in the euro if the bank seeks to address the recent rise in bond yields.

The EURGBP low was 0.8540 after Boris Johnson’s roadmap was rolled out and the pair could seek to test that level in the week ahead.

Rising Rates Could See ECB Action Next Week

Next Thursday will see the European Central Bank announce its latest interest rate decision and the recent activity in bond yields may see the bank looking to cool rate rise expectations. The ECB will likely hold rates steady once more at 0%, but there is potential for additional tweaks to bond purchases, or statements suggesting further action, after the recent rise in global rates.

Markets saw further selling yesterday after Fed Chair Jerome Powell shrugged off the inflation risk and the rise in US 10-yr bonds to 1.5%. It’s possible that the Federal Reserve are looking to shake out some of the froth from asset markets after the recent “bubble” calls, before they make any further moves. If we see any creep higher in the EU rates, then Christine Lagarde and her ECB colleagues may look to settle markets.

Any comments relating to further stimulus measures would impact the EUR to GBP rate, but the bank will have been pleased with the initial bounce in inflation after months of prices being stuck near 0% growth.

Cyprus Moves for May Flights from UK, EU Launching Deal Action

Cyprus has said it allow flights from the UK to begin in May in line with Boris Johnson’s plan for foreign travel restrictions being lifted. The Cypriot government has said that tourists who had received both vaccinations could travel without restrictions from the 1st of May.

But the date for arrivals is more than two weeks before the government has said people in England can leave the country for holidays.

Brussels is set to launch legal action against the UK “very soon” after the bloc accused Westminster of ‘violating’ a part of the recent Brexit deal. The action comes after Britain’s announcement that it will be extending grace periods for trade between the UK and Northern Ireland. These were set to expire at the end of March. Boris Johnson’s Brexit deal has still not been formally ratified by the EU but the country is already facing hostility after a ban on shellfish and now the legal action over trade.

The EURGBP has the support at 0.8550, while resistance for the euro would be last week’s highs near 0.8740. Get in touch using the form below to discuss these factors in further detail.

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