EURGBP Breaks 0.85 Support Despite Lagarde’s Rejection

The GBP to EUR rate was trading in a range for a year, but EURGBP has breached the significant 0.85 support level now and confirmed the bearish move with a 30-pip bearish gap following political developments in Europe over the weekend. The new support level to watch is around 0.8500.

Political uncertainty from the European Parliamentary elections and the announcement of early general elections in France, combined with the ECB’s cautious stance, contribute to a bearish outlook for the Euro against the British Pound. Traders should monitor these political developments and technical levels closely for further market direction.

EUR/GBP closed below the significant support level of 0.65 which was the first signal of the break, then the European Parliamentary elections results on Sunday and the announcement of early general elections by Emmanuel Macron in France followed. The bearish gap at the Asian market open last night confirmed the break below this support level.

EUR/GBP Chart Daily – The Support at 0.85 Should Turn into Resistance Now

Despite ECB President Christine Lagarde’s statement of not committing to rate reductions which should have offered some support as they did after the ECB rate cut last Thursday, the Euro is facing increased political pressure. The uncertainty surrounding European politics, including the early general elections in France, is contributing to the Euro’s weakness. With the break below 0.65, the level is expected to act as resistance now, while the 0.6340-50 level is anticipated to provide support for EUR/GBP.

ECB President Lagarde’s Comments and Market Implications

Key Points from President Lagarde’s Interview:

1. Non-Linear Rate Path:

   • Lagarde suggests that interest rates may not follow a straightforward declining trajectory. This indicates flexibility in the ECB’s approach to rate adjustments.

2. Potential for Extended Rate Holds:

   • The ECB may hold interest rates steady for longer periods, possibly more than one meeting, depending on economic conditions.

3. Focus on Labor Costs and Corporate Profits:

   • The ECB is closely monitoring labor costs and corporate profits, key indicators that could influence future monetary policy decisions.

4. Critique of Time-Dependent Guidance:

   • Lagarde believes that providing time-dependent guidance on rates is not helpful, suggesting a preference for data-driven decisions rather than pre-set timelines.

Recent ECB Interest Rate Cut:

• The ECB recently cut rates by 25 basis points, but this was seen as a “hawkish cut.” Some members felt the decision was pre-committed, limiting flexibility.

EUR/GBP Live Chart

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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