Interest rates will still remain unchanged and the ECB is expected to provide safe, steady and largely unchanged communication by noting that the momentum of economic recovery is improving following the vaccination program but risks remain in the future. ECB President Christine Lagarde is also expected to give a neutral statement at a press conference to be held shortly after the publication of the results of the ECB policy meeting. The ECB move is expected to give room for the EURO to strengthen temporarily in the short term.
The EURGBP pair has been moving horizontally and in a small range since May 2021 due to the balance of strength between the two currencies. USD weakness sentiment clearly supports the strengthening of EURO and GBP, and it has caused a horizontal movement for the EURGBP cross pair.
The G7 summit also brings risk for the pair, with President Biden’s warning, regarding the Northern Ireland peace deal¹.
EURGBP is seen trading flat and it has been trading in a small range between 0.8560-0.8650 since May. It is still trading below the 50-MA D1 level throughout this month so far. If investors see the ECB’s decision in today’s meeting as something positive, EURGBP has a chance to trade above MA-50 and target the market price of 0.8716 which is the April 2021 high. If investors are unhappy with the ECB’s decision and statement, EURGBP will probably be put under pressure and target the nearest support level at 0.8565. The movement of RSI-14 also indicates a triangle formation is being formed and it gives a high probability that a large movement will occur in the near future. The Bank of England’s policy meeting on June 24 may provide a temporary opportunity for the Euro to influence the movement of the EUR against the Pound.
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Tunku Ishak Al-Irsyad
Market Analyst
HF Educational Office – Malaysia
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