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EUR/GBP ahead of the BoE meeting
Information is not investment advice
EUR/GBP has so far been one of the most volatile currency pairs. It rose to 2-year highs and the ascent was fast. Daily oscillators show bearish divergence and indeed a correction took place yesterday: a bearish “engulfing” candlestick appeared on D1.
The upcoming meeting and press conference of the Bank of England (BoE) promise further moves of the exchange rate. There’s scope for more correction, so a decline below the Wednesday’s low at 0.9089 will open the way down at least to 0.9050 (July 17 high). Notice that the ultimate support is at 0.8950 (bottom of the bullish channel).
At the same time, the dovish Bank of England may weaken the GBP once again bring the pair back to the channel’s top. A rise above 0.9130 will make the pair rise to 0.9180.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates? Recall that the Federal Open Market Committee had previously ended the year 2022 with a 50bps hike, and an indication from Powell, the committee chairman, that the Fed could consider raising interest rates by 75bps in the course of the year 2023.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.