EURGBP could continue lower, but perhaps not immediately

The European Central Bank (‘the ECB’) left its main rates on hold on 18 July as widely expected. Although participants seem to be expecting one or two more cuts before the end of the year, the central bank itself doesn’t have a clear intention for September’s meeting. The main reason for the ECB’s reservation is that isn’t not clear yet whether inflation is declining quickly enough to justify further cuts when, at least for now, growth isn’t a major concern.

Relative to a major pair, euro-pound has been in a fairly consistent downtrend since late April and touched 10-month lows below 84p on 14 July. As for cable, though, immediate continuation is questionable due to the oversold signal from the slow stochastic. This indicator recently completed a crossover of the main line above the signal line within oversold, suggesting a bounce. ATR has also declined significantly since the middle of last month.

Probably the most important data next week for EURGBP are Wednesday’s German consumer confidence and PMIs. In the absence of any very major releases until national and eurozone-wide GDP on 30 July, the overall downtrend might continue after a possible short-term bounce.

This is my personal opinion which does not reflect the opinion of Exness. This is not a recommendation to trade.