Euro vs Pound Sterling: Euro Pound Exchange Rate Rejected by Resistance Level, GBP Aided by Trade Data
- Written by: Gary Howes
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The euro has suffered a setback against the pound sterling on Friday having run out of steam after encountering strong resistance.
The euro sterling exchange rate is 0.25 pct lower than seen at last night's closing level; EUR/GBP is quoted at 0.8307 as we head into the afternoon trading session in London.
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The euro's post-ECB rally has come to a halt today with widespread EUR weakness characterising the morning session on Friday.
Pound sterling (GBP) aided by Trade Data
The British pound complex has been further supported by news that the UK's trade situation is improving.
A shrinking trade deficit means that sterling inflows will likely increase as UK produced goods and services are bought, thus aiding the UK currency.
An increase in oil, chemical and aircraft exports helped the trade deficit in goods to fall by more than £2bn to £7.72bn, the ONS said.
Fewer imports of aircraft and ships also boosted the figures, it said.
Euro underpinned by Draghi
The euro has had a good week of trading against the British pound with yesterday seeing some strong gains.
The ECB kept the status quo with the main refi rate at 0.25%, the deposit rate at 0.00% and the marginal lending facility rate at 0.75%.
"Those expecting a policy action were disappointed; those expecting to hear a meaningful thought on slowing inflation were even more disappointed by the nonchalance in Draghi’s words. In his press conference, the ECB President Draghi said that change in interest rates take time to affect the economy," says a note on the euro issued by Swissquote Bank.
“There is subdued inflation yet no deflation” said Draghi, restating that the Euro-area situation is nothing similar to whatever happened in Japan in 1990s.
Outlook for the euro pound sterling exchange rate
Turning to the outlook, Swissquote say:
"EURGBP spiked to 0.83503 post-Draghi and hit the downtrend upper band; we keep our tactical bullish view as long as the 21-dma (today at 0.82716) support holds."
UBS say, "While resistance holds on closing basis at 0.8349, the cross remains vulnerable as bearish conditions persist. Support is at 0.8266 ahead of 0.8160."
ICN Financial note: "The pair is facing strong resistance from the main Falling Wedge shown on graph at 0.8345, where the pair needs to breach this level to confirm the resumption of the upside move over intraday and short term basis, eying 0.8410 initially, and then 0.8560.
"We still favour the general upside move as far as the pair is stable above 0.8285 and most importantly 0.8160. The pair needs to hold above 0.8285 and most importantly 0.8160, noting that temporary sideways fluctuation might be needed to gain upside momentum to support the suggested upside move."
US data will be today's key event
All eyes will turn to the US at 13:30 GMT today.
Today’s key event is the US January nonfarm payrolls and unemployment rate to be released at 13:30 GMT. The NFPs have greatly surprised on the downside in December reading, with 74’000 new nonfarm jobs added versus 200’000 expected.
Today, the consensus is 180’000; a second month of disappointment will raise doubts on Fed’s decision of tapering its bond purchases. DXY index rallied to 81.006, the 10-year US government yields crossed over 2.70% this morning.
