Euro-pound’s upward momentum seems to be declining

Considering monetary policy alone, it seems questionable whether euro-pound’s recent strong gains are sustainable since the current difference in rates of 1.75% in favour of the pound probably won’t shrink more than 0.2 or 0.3% this year. That said, sentiment on the pound has deteriorated markedly in recent weeks as the British government’s borrowing has accelerated, inflation in the UK declined and the economy was overall stagnant in the third quarter of 2024.

A gain of more than 1.5p by EURGBP in only about a fortnight is quite unusual. 84.5p was the area of the high at the very end of October last year, so this seems to be more established now as a resistance with several fairly large wicks over the last several periods. The 23.6% monthly Fibonacci retracement is a long way off at around 89p. If there’s a break above the current area, last summer’s highs around 85.5p or maybe slightly higher would seem to be more realistic for the near future.

Neither the 200 SMA nor the 38.2% Fibo gave notable resistance earlier this month, so it’s questionable how strong they might be as supports. A lot depends on the ECB’s press conference and preliminary inflation from the eurozone next week.

This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.