Fundamental Analysis of EUR/GBP for February 28, 2019

GBP has been the dominant currency in the pair since the price bounced off the 0.91 area with a daily close. A slowdown in the eurozone ahead of BREXIT next month helped GBP to sustain the bearish momentum in the period of uncertainty.

Recently German Buba President Weidmann spoke about eurozone's weakness. He stated that no interest rate increase should take place at least until summer. The eurozone's economic growth rate falls short of expectation. Inflation development is currently going to be the main focus. Citing Weidmann, temporary solutions can be applied but long-term sustainability is yet very much uncertain for the eurozone. According to ECB policymaker Villeroy, the ECB should decide how to reduce the risks from negative interest rates. At present, any changes in the key interest rate can pose a risk, though it it will have its advantage to some extent. Meanwhile, the ECB is not quite convinced to change its soft monetary policy at least by the end of 2019.

Today French Consumer Spending report is going to be published which is expected to increase to 1.1% from the previous value of -1.5%, German Import Price Index is expected to increase to 0.2% from the previous value of -1.3%, French Prelim CPI is expected to increase to 0.4% from the previous value of -0.4%, Spanish Flash CPI is expected to increase to 1.1% from the previous value of 1.0%, and Italian Prelim CPI is also expected to increase to 0.2% from the previous value of 0.1%.

On the other hand, Bank of England's Governor Mark Carney spoke about the possibility of BREXIT without a deal which would bring in greater risk for the financial services stability. According to Carney, "the biggest issue from a financial stability perspective, from a market integrity perspective, from continuity perspective, is a no-deal scenario by the end of March". The UK is due to leave the EU on March 29th but the question is still open whether Brexit will be with or without a deal. Moreover, Premier Theresa May survived another vote as she slowly brings her opponent on her side. Avoiding confrontation with the EU indicates that BREXIT can go without a deal.

Meanwhile, EUR is quite optimistic with the upcoming economic reports, while the UK is fastly approaching the Brexit deadline. Though GBP is the dominant currency right now, EUR could take advantage from positive eurozone's economic reports.

Now let us look at the technical view. The price is currently trying to push higher towards 0.8650 as of Mean Reversion towards the dynamic level of 20 EMA. As the trend is bearish, not much of a counter-trend expected. However, certain retracement along the way towards 0.8650 is expected before the price continues with the bearish pressure in the future.

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The material has been provided by InstaForex Company - www.instaforex.com

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