EUR/GBP Rebounded to 0.8515 ahead of BoE Gov Bailey Speech
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- Stephane Bancel warned that subsisting COVID-19 vaccines would be less efficient against the Omicron variant.
- Governor Andrew Bailey is due to deliver a speech titled “Delivering policyholder protection in insurance regulation” at the Institute and Faculty of Actuaries in London.
- A rise in EUR/GBP demand could trigger more buying above 0.8595 until the next hurdle at 0.8625.
On Wednesday, the EUR/GBP continued to trade with a bullish bias while traders waited for the BoE’s Bailey Speech. The day before, the EUR/GBP closed at $0.8522 after hitting a high of $0.8540 and a low of $0.8472. The EUR/GBP rose on Tuesday, reaching its highest level since November 12th, as risk-off market sentiment prevailed.
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The Moderna CEO drives risk-off sentiment.
Markets reverted to a risk-off mood when demand for safe-haven assets increased after comments from the CEO of Moderna. Stephane Bancel warned that subsisting COVID-19 vaccines would be less efficient against the Omicron variant than they have been against the Delta variant.
He said that the highly evolved Omicron variant was more immune to existing coronavirus vaccines than the delta variant. Reports also suggested that the makers of antiviral treatments Regeneron and Eli Lilly had seen the efficacy of their treatments fall compared to the new variant. This news added to the risk-off market sentiment and weighed heavily on riskier assets like the British Pound, which ultimately pushed the EUR/GBP higher on Tuesday.
A quick economic outlook
The euro currency was also strong against the British pound as the macroeconomic data from Europe came in favor of the single currency and pushed it higher, which ultimately added to the gains of EUR/GBP.
At 12:45 GMT, French consumer spending dropped by 4.4%, compared to the forecasted 0.0%, and weighed on the euro. The French Prelim CPI surged to 0.4% against the anticipated 0.2%, which supported the Euro and added further gains in EUR/USD.
French preliminary GDP for the quarter remained flat at 3.0%. At 13:55 GMT, the German unemployment change dropped to -34K against the forecasted-25K and supported the euro. At 15:00 GMT, the CPI Flash Estimate for the year surged to 4.9% against the anticipated 4.5%, which supported the euro.
The Core CPI Flash Estimate also surged to 2.6%, against the expected 2.3%, and added strength to the Euro. The Italian prelim CPI also increased to 0.7%, against the projected 0.1%, and supported the euro. These favorable economic figures added further upward pressure on the EUR/GBP on Tuesday.
From the UK side, there was no macroeconomic data to be released on Tuesday. However, a BOE policymaker, Catherine Mann, said that consumer confidence could be hurt more by the newly detected Omicron coronavirus variant, which would eventually slow the economy’s recovery from its historic pandemic hit.
She further said that health officials were concerned that it would be harder to tackle the Omicron variant with the existing vaccines and that this new variant could further push inflation higher. These comments from Mann limited the strength of the British Pound and capped further gains in EUR/GBP on Tuesday.
The BoE Governor Bailey’s to Address
The Bank of England Governor Andrew Bailey is due to deliver a speech titled “Delivering policyholder protection in insurance regulation” at the Institute and Faculty of Actuaries in London. As the head of the central bank, which regulates short-term interest rates, he has the most impact on the value of the country’s currency. Traders pay close attention to his public appearances since they frequently deliver subtle hints about future monetary policy.
EUR/GBP Technical Levels
Support Resistance
0.8482 0.8550
0.8443 0.8579
0.8414 0.8618
Pivot Point: 0.8511
EUR/GBP trade plan and technical outlook
The EUR/GBP is trading at 0.8500, having violated the double top resistance at 0.8488. However, the resistance has flipped to support now. Therefore, the EUR/GBP pair is likely to gain support at the 0.8488 level.
In the 4-hour timeframe, the EUR/GBP pair’s major resistance stays at the 0.8540 level. The closing of candles below 0.8540 indicates weakness in the buying trend; thus, the cross-currency pair can retrace to the 0.8488 level.
A spike in demand above 0.8488 may trigger a rebound in the cross-currency pair. Technical indicators such as RSI and MACD are in support of a mixed trend. For instance, the RSI is indicating a buying trend while the Stoch RSI is supporting a selling trend. Moreover, the 50-day EMA (exponential moving average) suggests odds of an upswing in EUR/GBP.
A breakthrough above 0.8539 can create additional room for an upswing until 0.8595. A rise in EUR/GBP demand could trigger more buying above 0.8595 until the next hurdle at 0.8625. On the other hand, increased selling pressure at the current market price can drive a downtrend until 0.8480 or 0.8445 support is reached. All the best, and stay tuned for more updates!
