CFD Trading Rate Euro vs Great Britain Pound (EURGBP)

• EUR/GBP remains under pressure near 0.8530 amid the ECB’s dovish stance. 
• The European Central Bank (ECB) held interest rates steady at their current record high on Thursday.
• Improved UK Manufacturing PMI data might convince the BoE to hold interest rates higher for longer than expected. 

The EUR/GBP cross extends its downside below the mid-0.8500s during the early European session on Friday. The Euro (EUR) loses traction after the European Central Bank (ECB) held interest rates steady at its January monetary policy meeting on Thursday. At press time, the cross is trading at 0.8530, unchanged for the day. 

The European Central Bank (ECB) maintained monetary policy and interest rates unchanged at 4% for the third straight meeting on Thursday. The central bank reiterated that it would keep rates high for a “sufficiently long duration” to bring inflation to target. ECB President Christine Lagarde delivered dovish comments and emphasized that a pre-summer rate cut remains "likely.”

The market is pricing 87% odds of a rate cut from the ECB in April and fully priced for 50 basis points (bps) of cuts by the June policy meeting. This, in turn, might exert some selling pressure on the Euro and act as a headwind for the EUR/GBP cross. 

On the other hand, the improved UK Manufacturing PMI data might convince the BoE to hold interest rates higher for longer than market investors had expected, which could lift the Pound Sterling (GBP). Market players will closely watch the BoE interest rate decision next week, which is widely anticipated to maintain interest rates steady at 5.25% for the fourth time in a row.

Later on Friday, the German Gfk Consumer Confidence Survey for February, the German Buba Monthly Report, and the French Consumer Confidence will be due.

• EUR/GBP experienced losses standing at 0.8530, down by 0.30%.
• The ECB held rates steady as expected.
• Christine Lagarde refrained from commenting on the timing of the ECB rate cuts.
• Monetary policy divergences gives the Pound traction over the Euro.

On Thursday's session, the EUR/GBP pair was observed at a trading level of 0.8530, seeing 0.30% loss. Bears seem to be gaining ground, as the daily chart manifests a bearish outlook. The four-hour chart extends this negative forecast, reflecting an increased dominance of sellers in the market's current state.

In that sense, the EUR/GBP weakened after the European Central Bank’s (ECB) cautious approach to interest rate cuts, with only minimal hints of cutting interest rates, and as for now the markets do not expect a rate cut until June. In contrast, the Bank of England (BoE) maintains a steady policy with markets expecting less easing than the ECB of 125 bps in 2024 which gives the GBP strength. Therefore, both the ECB's potential easing and the BoE's steady approach is pushing the cross downwards. Another factor that benefits the Pound is that the British economy is holding resilient to the BoE monetary policy which is pushing the bank to delay rate cuts.

EUR/GBP levels to watch

The indicators on the daily chart are depicting a bear-dominant market. The Relative Strength Index (RSI) is seen to be on a downward path, maintaining its location in the negative sector pointing towards an ongoing bearish momentum. Concurrently, the Moving Average Convergence Divergence (MACD) indicators display an increasing number of red bars, a sign that selling pressure is escalating. Moreover, the crosse's position below the 20, 100, and 200-day Simple Moving Averages (SMAs) further substantiates the bearish stance..

Shifting to a shorter timeframe, the bearish sentiment persists. The four-hour chart still mirrors the negative scenario with the indicators reinforcing the bearish outlook. The Relative Strength Index (RSI) persists in the negative territory with its negative slope indicating that bears continue to control the momentum. In line with this, the four-hour Moving Average Convergence Divergence (MACD) features rising red bars, again, marking an increase in selling activity.

EUR/GBP daily chart

• EUR/GBP edges higher toward the resistance zone around the nine-day EMA.
• A break above the 23.6% Fibonacci retracement level at 0.8579 could lead the pair to reach a weekly high at 0.8584.
• A break below the major support at 0.8550 could push the pair to retest January’s low at 0.8536.

EUR/GBP moves in an upward direction, inching higher to near 0.8560 during the European session ahead of the European Central Bank’s (ECB) interest rate decision. The area around the nine-day Exponential Moving Average (EMA) at 0.8570 aligned with the 23.6% Fibonacci retracement level at 0.8579 could act as a resistance zone.

The crossover above the resistance zone could create a bullish sentiment for the EUR/GBP pair. It could attempt to approach the weekly high at 0.8584 followed by the psychological barrier at 0.8600 level and 38.2% Fibonacci retracement level at 0.8606.

The technical analysis of the EUR/GBP cross shows that the Moving Average Convergence Divergence (MACD) line is situated below the centerline and exhibits a divergence below the signal line. This configuration suggests a potential bearish momentum for the pair.

Additionally, to validate the downward trend in the EUR/GBP cross, traders can consider the 14-day Relative Strength Index (RSI). The RSI, located below the 50 mark, further confirms the bearish sentiment in the market. These technical indicators collectively suggest a prevailing negative bias for the pair.

On the downward, the major level at 0.8550 appears as the immediate support for the EUR/GBP cross. A collapse below the major support could put downward pressure on the pair to retest January’s low at 0.8536 followed by the psychological support at 0.8500 level.

EUR/GBP: Daily Chart

• EUR/GBP posts modest gains near 0.8556 on Thursday. 
• The European Central Bank is set to hold interest rates at its January meeting. 
• Bank of England (BoE) is set to keep rates on hold on February 1 and will start its rate-cutting cycle at its August meeting.
• Traders await the European Central Bank (ECB) rate decision and press conference. 

The EUR/GBP cross remains on the defensive around the mid-0.8500s during the early European trading hours on Thursday. The European Central Bank (ECB) monetary policy decision will be closely watched by traders. The markets anticipate the ECB to maintain a status quo at its January meeting. At press time, the cross is trading at 0.8556, gaining 0.01% on the day.

The European Central Bank is expected to hold interest rates at their current record high at its monetary policy meeting on Thursday. The market has priced in a 60% odd of the first-rate cut as early as April, according to Reuters. ECB President Lagarde signaled in Davos that the first cut may come in the summer months of 2024. She stated that she remained reserved and data-dependent in her final outlook.

On the British pound front, the Bank of England (BoE) is set to keep rates on hold on February 1 and will start its rate-cutting cycle at its August meeting. Financial markets are widely anticipating the BoE cutting its rate in 2024 since inflation has fallen considerably since peaking at 11.1% in October 2022, the highest rate in four decades. 

Looking ahead, market players will closely watch the ECB rate decision and take more cues from the press conference. ECB's President Lagarde's speech might offer some hints about the future monetary policy path. These events could provide a clear direction for the EUR/GBP cross.