The EURGBP pair rose slightly as investors reacted to the bruising economic data from Europe and the reconstruction deal by the EU.
European leaders close to a deal
A virtual meeting of EU leaders inched toward a large financing agreement according to reporting by Bloomberg. In the meeting, Angela Merkel said that German would support a deal to fund the region recover after the current crisis. As the biggest economy in Europe, input from Germany is always coveted among EU members.
Still, the 1 trillion euros being negotiated are lower than the 2 trillion that the European Commission had requested. At the same time, there are differences on how to finance the deal. A number of countries like France, Italy, and Spain are requesting for countries to be given the money as grants. On the other hand, countries like Netherlands and Austria are demanding that the funds come in form of low-interest loans.
In a statement, Emmanuel Macron said that the real budget transfers would be needed for the reconstruction. He argued that loans will crack many members of the bloc.
Economic data disappoint
The meeting provided some relief to investors who are worried about a deep recession. This is because of the damaging numbers we have received in recent days. Yesterday, PMI data from the region showed that businesses contracted at the fastest pace in the past quarter. And today, data from the UK showed that retail sales dropped to the lowest level in history.
Data from Germany also disappointed. The survey showed that current assessment of business declined from the previous 92.9 to 79.5. Similarly, the Ifo business climate data declined from the previous 85.9 to 74.3. The business expectations declined from 79.5 to 69.4. These are the worst numbers recorded in the recent past.
Looking at the EURGBP four-hour chart, we can see several things. The most obvious is that the pair has been moving in a sideways direction this month. Second, we see that the price has been oscillating around the 50-day exponential moving averages data. Third, the price is trading along the 50% Fibonacci retracement level.
Also, using the Average True Range (ATR) indicator, we see that volatility has been inexistent. This could be a calm before the storm, meaning that we could see sharper moves in the near term. Therefore, the previous downward trend will happen if the pair is able to move below the support at 0.8680. On the flipside, a bullish trend will likely happen if the pair moves above the resistance at 0.8888.