The EUR to GBP (EURGBP) pair struggled to find direction as investors received divergent signals from the European Union and the UK.
In the UK, the government is expected to extend the ongoing lockdown for about three weeks. This is partly because the number of coronavirus cases is still rising. Just yesterday, more than 761 people died from the disease in the UK. This is slightly lower than the peak of 980 five days ago. The government hopes that the lockdown will help it manage the situation.
On the other hand, several countries in the European Union have started easing their lockdowns. Just yesterday, Angela Merkel announced that Germany would start a gradual process of reopening. The process will start with schools and some shops that are up to 800 square metres. Other companies that can reopen are auto dealers, book stores, and bicycle shops. Most large venues such as hotels will remain shut.
At the same time, data showed that industrial production in the European Union dropped by -0.1% in February from the previous month. It dropped by 1.9% on an annualized basis. This means that the sector declined before the crisis started. Inflation also struggled in March. The headline CPI rose by 0.1% after rising by 0.6% in the previous month.
Looking at the four-hour chart, we see that the EURGBP pair has hit a significant barrier between the 50% and 61.8% Fibonacci Retracement level.
It seems like there is some indecision between the bulls and bears as evidenced by the lower trending Bears Power Indicator. I still think that the downward trend will prevail especially if the pair breaks below the important support of 0.8685. If this plays out, the pair may move and test the May 5 low of 0.8615.