Today, the pound completely ignored the published data on the growth of the British economy and the volume of industrial production. The British currency is still under the pressure of Brexit: after the last failed negotiations between Laborites and Theresa may, this issue again plunged into an atmosphere of uncertainty. In pair with the dollar, the pound balances on the border of 29 and 30 figures – but in this case, the further vector of the pair's movement will depend on the data on the growth of US inflation. Therefore, it is quite risky to "put on a slide", as the price can demonstrate the Northern dynamics due to the weakness of greenback, if the US consumer price index disappoints investors.
In light of these circumstances, the EUR/GBP pair looks quite interesting. Since May 6, that is, since the beginning of this week, the EUR/GBP has been growing steadily, rising in 5 days from 0.8490 to the current level of 0.8630. The almost recoilless price growth is caused not only by Brexit – the pair is also growing due to the revaluation of the single currency, against the background of the recovery of key macroeconomic indicators of the eurozone.
However, the locomotive of the Northern trend EUR/GBP are still British events. Contrary to the hopes of traders, Laborites and Conservatives failed to agree. Yesterday, the leader of the Labor Party Jeremy Corbyn actually put an end to the negotiation process. He said that the government of Theresa May has not yet voiced "constructive proposals", so further dialogue does not make practical sense. Formally, the parties did not withdraw from the negotiations – yesterday, the representative of May announced a universal phrase about the ongoing consultations. In addition, both the Conservatives and the Labor are now focused on the election campaign in the European Parliament, so until June, politicians are unlikely to take active action on Brexit.
According to the latest information, Downing Street is now developing new proposals that should help to break the current impasse. What exactly is at stake, and how the new ideas will differ from those voiced earlier – is unknown. But British journalists became aware that Theresa May is not going to leave her post until at least the fall, namely until the annual party Congress of the Conservative Party. In turn, the party members of the Prime Minister cannot dismiss her, as at the end of last year she gained annual immunity against a new vote of no confidence (then the conservative opposition lost the vote).
In addition, if Theresa May does not announce her intention to resign before mid-July, conservative deputies will not be able to complete the vote on candidates for party leaders before returning to Parliament in September. And judging by the rhetoric of the Prime Minister, she has no such intentions. All this suggests that in the coming months, the topic of Brexit will again take a sluggish form, while the information vacuum has a negative impact on the positions of the British currency.
But the European currency still retains the potential for its growth. The latest data on eurozone GDP growth and inflation came out in the "green zone", exceeding the expectations of experts. Positive trends were recorded in Italy, France, Spain, and (especially) Germany. Representatives of the ECB have already responded to these figures.
Thus, according to the head of the Estonian Central Bank Ardo Hansson, the latest results suggest that the European Central Bank has chosen the right tactics, so the regulator for the next few months will take a wait-and-see position. At the same time, he added that the economic data that will be published during this time will become a "determining factor" regarding the prospects of monetary policy. In other words, Hansson leveled the fears of traders about the return of QE – this issue is clearly irrelevant for the regulator (although the ECB Vice President Guindos did not rule out such an option). Secondly, the issue of rate hikes is still "in the sights" of the European regulator: if the Eurozone's key indicators continue to recover, the ECB may return to this issue in the first half of next year.
Thus, the single currency in the EUR/GBP cross-pair looks more attractive, given the growth of the main indicators of Europe and the rhetoric of the ECB. But the pound will continue to follow Brexit, the prospects of which still look vague.
In terms of technology, the situation is as follows. On the daily chart, the EUR/GBP pair is trading in the Kumo cloud of Ichimoku Kinko Hyo indicator and on the middle line of Bollinger Bands indicator. This suggests the advantage of flat movement, without a bright vector of the price direction. However, if the pair is fixed above the average line of the Bollinger Bands indicator on the D1 timeframe, there is a high probability of further growth – up to the upper limit of the Kumo cloud, which corresponds to the level of 0.8655. This level is the resistance, but the support is the price of 0.8580 – this is the lower limit of the Kumo cloud. If the price is fixed under this mark, the Northern scenario will lose its relevance.
