EURGBP was higher on Thursday after the Bank of England boosted its quantitative easing program by £150bn. The BoE also warned that the lockdown measures introduced for the coronavirus will see the economy hit and could create a double-dip recession for the country.
The extended asset purchase scheme by the BoE larger than analysts were expecting and they warned that consumer spending was weak, saying in a statement:
“There are signs that consumer spending has softened across a range of high-frequency indicators… Developments related to Covid will weigh on near-term spending to a greater extent than projected in the August Report, leading to a decline in GDP in 2020 Q4.”
Another projection from the Bank of England was for the jobless rate to peak at 7.75% in the second quarter of 2021, up from 4.5% now, which would be the highest level since 2013. Chancellor Rishi Sunak is also looking at bending to pressure from businesses by extending the furlough scheme beyond December.
The European Central Bank is almost certain to follow the BoE with an increased stimulus package at their next meeting and this will contain any Euro strength for now. Brexit is still ongoing and this is also dragging on the EURGBP with the EU’s Chief negotiator saying yesterday that were still, “very serious divergences” between the two parties.
EURGBP Technical Outlook
EURGBP traded to a low near 0.8950 yesterday but has since rallied above the support at 0.9030. This consolidation of price continues to hold the pair but it is still trending in the pound’s favour and we need some larger catalyst, such as a Brexit deal to see a new trend emerge. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
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