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The battle of the two European currencies continues with cable recently winning the war as hotter than expected UK Retail sales data has revived expectations that the BoE maybe forced to tighten rates relatively soon. In fact many speculators are betting that UK will raise rates sooner than US as monetary policy moves towards normalization. However, the latest comments from BOE chief Mark Carney suggest that the BoE is far away from even considering any form of tightening as the Governor expressed concern over the strength of the pound. Indeed the fact that the BoE is worried about the appreciation in the currency, indicates that cable may be in for a correction. In the meantime, conditions in Europe appear to be improving as German PMI’s hit 31 month highs. That means the EUR/GBP which has been mired at the lows could begin to stage a rally towards the 8400 figure.
From a technical perspective, EUR/GBP appears to have found support at the 8200 level on the weekly charts and the close near the highs suggests that the pair may test resistance at the 8400 while 8200 now acts as strong support