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EUR/GBP – Ready To Rally?
What’s happening with the pound? At one time the market was convinced that the the BoE would be quick to follow the Fed in hiking rates. Indeed the UK economy has performed even better than the US economy, but you would never know that if you listened to members of the MPC. Today Andy Haldane sent tremors through the market when he noted that inflation risks were skewed to the downside and most importantly stated that the central bank must be prepared to act in either direction in order to combat any weakness in the economy.
Although Mr. Haldane is the most dovish of BOE members, even a mere suggestion of possible easing at a time when the market anticipates only tightening from the BoE sent cable lower creating jitters amongst currency traders. Governor Carney offered no help to cable bulls when he reaffirmed that rates are likely to remain low for a considerable period of time.
With UK monetary officials striking a decidedly dovish posture in their most recent comments to the market the prospect of further losses in GBP/USD is high and the pair could test the 1.5000 level before the week is over and that in turn is good news for EURGBP bulls. With euro finding support at the 1.0600 level the pair looks to be carving out a higher low near the .7000 mark and could rally to .7200 if cable continues to sink further.