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EURGBP may drop further
Forex
01/25/2019

EURGBP may drop further

What is going on with the European currencies now cab be clearly seen in the GBPUSD dynamics. The cross has lost more than 3% over the last ten trading days and touched a May 2017 low marginally above 0.86 on Friday.

What is going on with the European currencies now cab be clearly seen in the GBPUSD dynamics. The cross has lost more than 3% over the last ten trading days and touched a May 2017 low marginally above 0.86 on Friday. It looks like the pair has found a local bottom at this level as the euro turned positive on the day during the European session. However, the fundamentals continue to signal the downside risks for the cross are still there.

The common currency sell-off intensified after Draghi highlighted the increasing downside risks for the regional economy. Moreover, ECB’s Vasiliauskas said today that the central bank forecasts will be revised in March while the balance of risks has a ‘negative outlook’. Meanwhile, the ECB released the results of its latest survey of professional forecasters that sees slower growth and inflation projections. In particular, 2019 GDP growth is now seen at 1.5% versus the previous estimate of 1.8%. All the comments and numbers confirm that a rate hike this year is getting more unlikely, which will continue to press the euro lower.

Considering the rising chances of a ‘soft’ Brexit, the near-to-medium outlook for EURGBP remains bearish. So despite the oversold conditions the cross will likely resume the downtrend after a pause. An important technical break below the immediate support at 0.86 could attract more sellers and open the way towards 0.85.

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