7 Nov 2013
EUR/GBP massaged lower by ECB
FXstreet.com (London) - EUR/GBP has dumped a big figure from above the 0.84 handle and printed a low of 0.8300.
Research teams at HSBC explained that the ECB's surprise decision to lower interest rates will weaken the EUR and this most likely is exactly what the central bank wants. “Net exports have been the major driver of GDP growth over recent quarters, and the rise in EUR was increasingly threatening this engine of growth. Meanwhile, a lower EUR will also help push up inflation through higher import costs.
A double-whammy from ECB
The ECB will hope this double-whammy of the exchange rate effect on growth
and inflation will help curtail the deflation threat. As we noted in our recent report "EUR strength demands a response", the Fed worries about long-term interest rates and the BoE recognises short-term interest rates have the greatest UK economic impact. But the ECB's most potent economic tool to help growth and fight the deflation threat, especially with rates so close to zero, is the exchange rate. Today's easing marks the first overt step in massaging the EUR lower. It certainly will not be the last”.
EUR/GBP Levels
The 20 DMA is 0.8485, the 50 DMA is 0.8450 and the 200 DMA is 0.8534. RSI (14) reads 18.80. Supports are ascending from 0.8220, 0.8280, 0.82540 and 0.8300. Spot is currently 0.8303 while resistances are 0.8376, 0.8405, 0.8428, 0.8453, 0.8480 and 0.8505.
Research teams at HSBC explained that the ECB's surprise decision to lower interest rates will weaken the EUR and this most likely is exactly what the central bank wants. “Net exports have been the major driver of GDP growth over recent quarters, and the rise in EUR was increasingly threatening this engine of growth. Meanwhile, a lower EUR will also help push up inflation through higher import costs.
A double-whammy from ECB
The ECB will hope this double-whammy of the exchange rate effect on growth
and inflation will help curtail the deflation threat. As we noted in our recent report "EUR strength demands a response", the Fed worries about long-term interest rates and the BoE recognises short-term interest rates have the greatest UK economic impact. But the ECB's most potent economic tool to help growth and fight the deflation threat, especially with rates so close to zero, is the exchange rate. Today's easing marks the first overt step in massaging the EUR lower. It certainly will not be the last”.
EUR/GBP Levels
The 20 DMA is 0.8485, the 50 DMA is 0.8450 and the 200 DMA is 0.8534. RSI (14) reads 18.80. Supports are ascending from 0.8220, 0.8280, 0.82540 and 0.8300. Spot is currently 0.8303 while resistances are 0.8376, 0.8405, 0.8428, 0.8453, 0.8480 and 0.8505.