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On Wednesday, the pound witnessed a sharp surge with recent opinion polls reporting that the “Remain In EU” camp has extended its lead in the upcoming UK referendum, over the last month — with 55% of sampled voters, voting for staying in and 37% for leaving. After the results were released, EUR/GBP took a sharp knock to as low as 0.76767 and finished the trading session at 0.7768, losing 0.67%.
Sterling has already found solid buying interest mid-week as UK employment and wage data beat analyst forecasts. According to the Office for National Statistics, data shows that the number of people claiming unemployment benefits actually fell by 2,400 to 737,800 while analysts had forecast a 4,300 rise. In addition, 44,000 more people were in work compared with the previous three months, bringing the number of employed to 31.58 million workers in total.
Earlier today, UK April Retail Sales reported an improvement of 1.3% compared to the last month’s figures, beating analysts’ forecast for a 0.6% rise. The better-than-expected data further relieves fears of the potential damage caused by ‘Brexit’ related uncertainty, ensuring that demand for the Pound will remain bullish for quite some time.
Meanwhile, the euro continues to suffer from inflation data that confirmed prices in the Eurozone still remained stagnant. Whereas U.S and UK inflation rates are climbing higher, negative rates of price growth in the euro zone were reported earlier today. This has increased the possibility of a future interest rate cut in Europe, weakening the euro’s strength.
With the Fed minutes now behind us, focus shifts towards today’s release of the ECB’s Monetary Policy Account from its previous meeting. This is very similar to the minutes from the FOMC meetings. The data will be closely scanned for hints on future policy opinions within the ECB. The account could boost the appeal of the Euro, if policymakers are shown to have expressed mildly dovish sentiments. Greater signs of hawkishness would undermine the likelihood of further policy easing in the near future, prompting the single currency to rally.
However, if there are continued suggestions that interest rates could go lower still, the Euro could slump across the board.
Fig EURGBP D1 Technical Chart
After plunging wildly to 0.76767, the pair seems to be continually bearish and is currently trading at 0.76608. RSI is 30.22, close to the oversold territory, indicating strong selling power. The price action is expected to continue the current downtrend until it reaches the support level at 0.75630.
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