EUR/GBP Tests the Upside As ECB Pushes Back on Rate Cut Expectations
EUR/GBP was bullish during December, however, it reversed lower at the start of January and remained bearish in the first week. However, last week the price consolidated and today we saw a weak attempt from buyers trying to push back on market expectations for rate cuts.
The 20 SMA (gray) has been acting as resistance for EUR/GBP, keeping it subdued, but recently traders have shown willingness to push the price higher. However, despite the 20 pip push higher today, EUR/GBP is currently trading below all the simple moving averages (SMA) on the H1 chart, which indicates that the pressure remains on the downside. For the moment though, this pair is trapped in the range between 0.8585 and 0.86320 for about a week.
Today we had two European Central Bank (ECB) members commenting on this topic, and both Holzman and Nagel refused the idea of a rate cut in March by the central bank. If this consists, then the Euro should turn the most bullish currency soon, however, traders are also looking at the economic data from the Eurozone, which doesn’t paint a bright picture.
Comments from ECB Member Robert Holzmann
- Market forecasts about ECB rate cuts are optimistic.
- Geopolitical changes pose a risk to the price forecast.
- Holzmann Does not anticipate a real recession looming in the Eurozone.
Markets are expecting the CB to start cutting interest rates in March, however, the ECB is hard to ease the expectations and push back against present market pricing of rate cuts. Nagel here, implying that policymakers are looking for a considerably longer schedule for rate cuts – or so they claim.
ECB Policymaker Nagel Speaking
- It is too early to discuss rate reduction.
- Markets are sometimes too optimistic.
- We are data-dependent. Inflation remains too high.
- Maybe we can wait until summer break before considering pricing decreases.
The idea of delaying rate hikes until after the summer is interesting and it is keeping the Euro more supported than other risk currencies today, as this would postpone the schedule for the ECB to start cutting rates to September. If this is the case, the market will need to make a significant adjustment in what is priced in.
EUR/GBP Live Chart
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