EURGBP Unlikely to Fill Bearish Gap As the Decline Resumes

The GBP to EUR rate has been fluctuating within a range for the past year, but EUR/GBP recently dropped below the critical 0.85 support level following a 30-pip bearish gap due to political developments in Europe earlier this month after the European Elections. The price briefly fell below 0.84 before rebounding and trading 50 pips higher, though it remains confined between two moving averages.

EUR/GBP Chart Daily – The 20 SMA Has Turned into Resistance Now

Despite ECB President Christine Lagarde’s remarks about not committing to rate cuts, which should have offered some support after the ECB’s rate cut this month, other ECB policymakers have hinted at further cuts, especially following the SNB’s rate cut in its second meeting last week. Additionally, the Euro is under considerable political pressure. The uncertainty surrounding European politics, particularly the early general elections in France where right-wing parties are leading in surveys, is contributing to the Euro’s weakness.

Last week we saw a retrace higher, as buyers attempted a trend reversal, but the attempt was weak and the 20 SMA (gray) turned into resistance, rejecting the price. This week sellers have returned and now we’re looking at this month’s lows again.

Germany June Ifo business climate index released by Ifo – 24 June 2024

  • Overall Business Climate Index:

    • June: 88.6
    • Expected: 89.7
    • Prior: 89.3
  • Current Conditions Index:

    • June: 88.3
    • Expected: 88.5
    • Prior: 88.3
  • Expectations Index:

    • June: 89.0
    • Expected: 91.0
    • Prior: 90.4 (revised to 90.3)
  • Implications:

    • All three readings missed estimates.
    • Indicates weakening economic sentiment towards the end of Q2.
    • Likely affected by recent political issues in the region.

The June Ifo business climate index for Germany recorded a value of 88.6, which is below the anticipated 89.7 points and down from the previous month’s 89.3 points. The current conditions index remained steady at 88.3, aligning with expectations but unchanged from the prior figure. The expectations index, however, declined to 89.0 points, falling short of the forecasted 91.0 and dropping from the revised 90.3 points in May. This decline across all three readings suggests a weakening in economic sentiment as the second quarter comes to a close. The deterioration is likely influenced by the recent political uncertainties in the region, adding to the challenges facing the German economy.

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Skerdian Meta
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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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