Almost all currencies have loosened against the greenback today, but the GBP keeps rallying. How is it possible?
EUR/GBP: three-months top
Does the pair still have the potential to the upside?
The British pound has been the worst performing major currency amid the coronavirus pandemic. The main reason is that investors have started to increasingly correlate it with risk. That’s why, fears of the second virus wave pushed it down. The global amount of coronavirus cases has exceeded 10 million this weekend. Investors are concerning about the potential virus resurgence in Leicester.
Moreover, Brexit negotiations weigh additional pressure on the pound. The overall situation over the Brexit deal is uncertain as it hasn’t been any breakthrough yet in the EU-UK talks. The British economic recovery is slower in comparison with European countries. Also, the Bank of England cut the quantitative program too early, that had a negative impact on the GBP. However, the central bank pledged to increase it, if needed. So, it’s just a matter of time.
Unlike the GBP, the euro is more attractive for investors. It has even outperformed the US dollar. The Eurozone has the best coronavirus outlook. Since the whole market sentiment is driven by the COVID-19 developments, EUR has gained. Moreover, investors are optimistic about the European Central Bank recovery fund. If the German chancellor Angela Merkel and the French president Emmanuel Macron make a progress in this deal, EUR may rise. We’ll know on July 17-18 at the EU summit.
The EUR/USD is approaching the 61.8% Fibonacci retracement level at 0.9200. If it breaks it through, it will surge further to the next resistance at 0.9340. Support levels are at 50% and 38.2% Fibo levels – at 0.9100 and 0.9000, relatively. Some analysts consider that it’s overbought, but others still have bullish prospects.
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