The Sterling has surged versus the Euro amidst growing speculator interest and the UK Prime Minister’s plan for reopening the economy.
The latest CFTC Positioning Report indicates that the net long positions on the British Pound have increased as speculators add to their net long positions. This is coming as the UK increases its coronavirus vaccine rollout, with available data showing that the vaccination campaign and lockdowns appear to be cutting new infections. This situation has paved the way for the phased reopening of the UK economy that has been announced by UK PM Boris Johnson.
What is setting the UK apart from the EU and thus helping the Pound surge to new multi-month highs against the Euro appears to be the coronavirus vaccine coverage being achieved on both sides. Nearly 26% of the UK’s population has been inoculated at least once. The EU is seriously lagging in this regard, vaccinating only 4% of its population. Logistics around the acquisition and distribution of the vaccines has also been very problematic in the EU.
The UK PM has put forward a 4-stage reopening process that will see schools, sports venues, outdoor hospitality venues and businesses reopen between March and June 2021. This has set the stage for the Pound to gain ground on the Euro by 0,3% this week.
Technical Levels to Watch
The EURGBP is in the 5th straight week of losses, with the next target seen at 0.85952 (neckline of the double bottom of December 2019/February 2020). Below this level, additional support is expected at 0.84883 (March-May 2019 lows) and 0.83932 (20 January low).
On the other hand. a recovery bounce at 0.85952 may be a sign of profit-taking retracement, which targets 0.86811 and possibly 0.87873. Further targets to the north include 0.88695 and 0.89488. Any rallies may be seen as opportunities to sell by bulls on the Pound.
EURGBP Weekly Chart