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EUR/GBP: Results of the ECB meeting and on the eve of the Bank of England meeting

19 June 2023, 14:54

Yuri Papshev

176

As you know, the Fed, the ECB and the Bank of Japan held their meetings last week. This week, 2 more of the world's largest central banks (except for the Central Bank of China) will hold their meetings on monetary policy issues.

On Thursday at 07:30 (GMT), the Swiss National Bank will announce its decision, and at 11:00 – the Bank of England. Most economists believe that the Bank of England will continue to raise the interest rate to at least 5.5% (now 4.50%).

It is widely expected that at Thursday's meeting, the Bank of England will raise the interest rate by 0.25%, to 4.75%. In this regard, it is logical to assume further strengthening of the British pound, and it really continues to strengthen, including in cross-pairs, for example, against its main competitor in the European euro market, despite the ECB's decision last week to raise interest rates.

From a technical point of view, the EUR/GBP pair is testing the lower boundary of the descending channels on the daily and weekly charts for a breakdown, falling deeper towards the key support levels 0.8400, 0.8210, separating the global bullish trend of the pair from the bearish one.

The breakdown of the 0.8705 level last month caused EUR/GBP to move into the medium–term bear market zone, and the breakdown of the key support level 0.8655 - into the long-term bear market zone.

Given the expectations of a stronger interest rate hike by the Bank of England than the ECB, we assume a further decline in EUR/GBP towards the support level of 0.8400.

In an alternative scenario, and after the breakdown of the local resistance level of 0.8610, EUR/GBP will resume growth towards the key resistance level 0.8655, the breakdown of which may provoke further growth, and the breakdown of the key resistance levels 0.8705, 0.8720 will again bring EUR/GBP into the zone of medium- and long-term bull markets, again making long positions preferable.

As for the important macro statistics for the Eurozone and the UK, it will be presented tomorrow and on Wednesday, with the publication at the beginning of the European trading sessions of data on producer price indices in Germany and consumer inflation in the UK.