- EUR/GBP extends the decline to near 0.8310 in Friday’s early European session.
- The negative outlook of the cross remains intact as the price holds below the 100-day EMA, with bearish RSI indicator.
- The immediate resistance level emerges at 0.8355; the first downside target is seen at 0.8290.
The EUR/GBP cross remains on the defensive around 0.8310 on Friday during the early European trading hours. The Bank of England (BoE) cut interest rates by 25 basis points (bps) at its November meeting on Thursday, bringing the benchmark rate to 4.75%. BoE Governor Andrew Bailey said during the press conference that the central bank needs to retain a “gradual approach” to policy easing.
However, the expectation that the BoE would cut rates less aggressively than the European Central Bank (ECB) could provide some support to the Pound Sterling (GBP) and cap the upside for the cross in the near term.
According to the 4-hour chart, the negative outlook of EUR/GBP prevails as the cross remains capped below the key 100-period Exponential Moving Averages (EMA). Furthermore, the downward momentum is reinforced by the Relative Strength Index (RSI), which is located below the midline near 35.55, indicating that the further downside cannot be ruled out.
The first downside target for the cross emerges near the lower limit of the descending trend channel at 0.8290. A breach of this level could see a drop to 0.8230, the low of March 4, 2022. The next contention level to watch is the 0.8200 psychological level.
In the bullish case, the crucial resistance level is seen at 0.8355, representing the confluence of the upper boundary of the trend channel and the 100-period EMA. A decisive break above this level could see a rally to 0.8419, the high of November 4.
EUR/GBP 4-hour chart
(This story was corrected on November 8 at 09:53 GMT to add the EUR/GBP chart.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD remains pressured below 1.0800, US data eyed
EUR/USD is trading under pressure below 1.0800 in European trading on Friday. A renewed US Dollar uptick and a cautious mood weigh on the pair, as traders digest the Trump win and the Fed rate cut ahead of the US preliminary Consumer Sentiment data for November.
GBP/USD holds lower ground near 1.2950 amid tepid risk sentiment
GBP/USD edges lower toward 1.2950 in the European session on Friday. The emergence of dip-buying in the US Dollar and a tepid risk tone undermine the pair. The BoE’s cautious rate cut could check the pair's downside as traders look to BoE-speak, US data for fresh incentives.
Gold price seems vulnerable while below $2,700 amid stronger USD, positive risk tone
Gold price drops to the $2,680 area during the first half of the European session on Friday and is pressured by a combination of factors. Hopes that Trump's policies would spur economic growth and inflation, to a larger extent, overshadow the Fed's dovish outlook, which, in turn, helps revive the USD demand.
Bitcoin touches new all-time high near $77,000 following Fed rate cut
Bitcoin price rallied and reached a new all-time high of $76,849 following the US Federal Reserve’s 25 basis point rate cut. Ethereum and Ripple followed suit and closed above their key resistance levels, hinting at a possible rally ahead.
Outlook for the markets under Trump 2.0
On November 5, the United States held presidential elections. Republican and former president Donald Trump won the elections surprisingly clearly. The Electoral College, which in fact elects the president, will meet on December 17, while the inauguration is scheduled for January 20, 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.