EUR/GBP: Strong Upward Impetus

EUR/GBP: Strong Upward Impetus

7 April 2016, 14:29
Roberto Jacobs

EUR/GBP: Strong Upward Impetus

Yesterday’s news triggered the decline in the USD in the market. Following the information released by US EIA at 16:30 (GMT+2) which showed that US oil reserves last week fell by 4.937 million barrels against the rise of 2.299 million barrels a week before, the price of oil went up. The price of crude oil Brent rose by 1.3 USD per barrel, reaching the level of 39.80 USD within two hours. The pair EUR/USD, which is correlated with prices of oil by almost 96%, also went up. The decline in USD accelerated after the release of the minutes of the US FOMC meeting at 20:00. The minutes showed that most of the members of FOMC were against the increase of short-term rates in April.

The only major currency pair with the USD which closed yesterday’s trading day in the negative zone was GBP/USD.

The Pound has been under pressure since the beginning of the month. One of the main negative factor is the upcoming referendum in June on the possible exit of the UK from the EU.

Terrorist attacks in Belgium and developments in Eurozone associated with migration situation, as well as yesterday’s referendum in Netherlands where people of the country voted against accession of Ukraine to the EU have strengthened the positions of the centrifugal forces before the referendum in the UK on 23 of June.

If people in the UK vote for the exit of the country from the EU, British stock market and the Pound may fall.

The pair EUR/GBP rose above the level of 0.8110 (the highs since June 2014). Negative expectations of the referendum boost the rise in the pair EUR/GBP, despite the fact that the pair is overbought. The pair will be bought at any downward correction. Therefore, prior to 23 June it is expected that the pair will continue to rise. However, note that at 15:00 (GMT+2) the head of the ECB Mario Draghi will make a speech, in which he will try to stop the rise in the Euro.


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