The EUR to GBP (EURGBP) pair is at the highest level since March 27 as investors reacted to the positive developments in the eurozone. The pair is trading at 0.8993 and is relatively unchanged today.
Eurozone set for a windfall
The biggest news in recent days has been about the new recovery fund requested by the European Commission. On Wednesday, Ursula von der Leyen requested more than $523 billion to help countries fund their recovery. More than $80 billion of these funds will go to Italy while $77 billion will go to Spain. Other big winners are France, Germany, and Poland.
The biggest challenge for the European Commission is to get the frugal four countries to accept the deal. These countries, which include Denmark, Netherlands, and Austria, have said that all funds should be in the form of low-interest loans. Still, these countries are in the minority and there is a possibility that the bill will pass.
Germany retail sales fall
The EURGBP pair reacted to several weak data from Europe today. In Germany, the import price index declined by 1.8% in April after falling by 3.5% in the previous month. The index fell by a record 7.4% on a year on year basis. While these numbers were bad, analysts believe that the performance of the German economy has bottomed.
The retail sales dropped by 5.3% in April, which was lower than the March decline of 4.3%. It dropped by 6.5% in the month on an annual basis. These numbers were better than what analysts were expecting.
Meanwhile, France avoided a deflation in May. According to the statistics office, the country’s consumer prices were unchanged in the month. They rose by 0.2% on an annual basis. The harmonised CPI was also unchanged. In the next two hours, we will receive the preliminary eurozone inflation data.
On the daily chart, the EURGBP pair is trading at 0.8993, which is the highest it has been since March. The pair has managed to recover from the minor decline that saw it test a low of 0.9000. The price is still above the 50-day and 100-day exponential moving average and is forming a pattern that resembles a cup and handle. Therefore, the price will likely continue rising as bulls attempt to move above the 0.9032.
On the flip side, a move below 0.8900 will invalidate this prediction. This price is slightly above the 50% Fibonacci retracement and is also an important psychological level.