Euro to Pound Sterling: EUR/GBP Calm Ahead of FOMC But Outlook Favours GBP Still

By Sam Coventry

The euro has advanced against the British pound sterling (GBP) through the course of today's session however the outlook continues to favour the GBP.

The euro to pound sterling exchange rate has maintained a deadlock through the course of Wednesday's trading session; EUR/GBP is  quoted at 0.8243 as we head into the last hour of London equity trade.

A definitive price action move is not expected until the Fed’s statements are released later today.

Be Aware: All our EUR quotes are taken from the inter-bank markets. Your bank will deliver your currency after levying a spread on the rate. However, an independent FX provider will guarantee you a more competitive spread, thus delivering up to 5% more currency. Please learn more here.

The euro has benefited following an easing back in sentiment through the course of the European trading session.

Markets had been bullish on news that the Turkish central bank took aggressive steps to ease concerns over that country's currency, a move that saw the EUR complex weaken.

Now that markets are turning south again we have seen some support for the EUR.

Outlook for the euro sterling exchange rate

Despite today's gains, the outlook is decidedly in favour of the British pound.

Analyst Gareth Berry at UBS says he is bearish on the euro sterling: "The important resistance is at 0.8349. While this holds, the cross remains vulnerable to extend its bearish trend to test support at 0.8160. A close below which would be the next bearish development."

 

MIG Bank tell us:

"EUR/GBP declined significantly on Monday near the resistance implied by the steeper declining trendline. A break of the initial resistance at 0.8253 is needed to suggest a return of some short-term buying interest. Hourly supports stand at 0.8210 (24/01/2014 low) and 0.8168. Another resistance lies at 0.8306.

"In the longer term, the technical structure remains negative as long as prices remain below the resistance at 0.8350 (13/01/2014 high). Monitor the support implied by the 61.8% retracement (of the 2012-2013 rise) at 0.8160. Another key support can be found at 0.8082 (01/01/2013 low)."

Today's European FX session in brief:

The following summary comes courtesy of FX Market Alerts:

  • The initial European reaction to last night's rate action in Turkey was to reverse some of the moves seen on the 'relief rally' with USD/JPY sliding down as the Nikkei futures gave back some gains.
  • AUD and NZD are also off the highs, the NZD holding up better ahead of the RBNZ decision due hot on the heels of the FOMC later on, while USD.CAD found support around 1.1125.
  • No great excitement in EUR/USD where a soft Eurozone M3 release was basically overlooked as the range held inside that seen yesterday. GBP is just marginally softer overall, a modest upside surprise to Nationwide house price data not offering any obvious support to a market that is already long.
  • EUR/CHF topped out ahead of 1.23 as Europe took a more sceptical line on any long term calming effect from the moves in Turkey.
  • All fairly familiar again in Scandinavia after Norwegian LFS unemployment surprised with a rise to 3.5% (from 3.3%)

Afternoon Session

All the action is currently to be found in emerging market currencies where rate hikes in Turkey and South Africa saw markets smelling blood.

The Turkish lira went on a rollercoaster ride after the Turkish central bank increased their overnight lending rate from 7.75% to 12% (along with other significant increases in their primary lending rates), initially causing the lira to rally over 3% against the USD—these gains were eliminated overnight as traders’ worry of further contagion amongst emerging market economies.

The Rand has experienced similar selling pressure after the SARB raised interest rates.