EUR/USD and GBP/USD appreciate while EUR/GBP stalls
Outlook on EUR/USD, EUR/GBP and GBP/USD amid record UK public sector deficit.
EUR/USD continues its advance
EUR/USD’s advance from its early-January low at $1.0484 low so far made a new nine-month high at $1.0926 amid hawkish comments by European Central Bank (ECB) officials over the weekend.
The currency pair remains on track to reach the late-April 2022 high and the 50% retracement of the 2021 to 2022 descent at $1.0936 to $1.094 over the coming days while it stays above the January uptrend line and 12 January low at $1.0867 on a daily chart closing basis. Above $1.094 beckons the psychological $1.10 mark. Support remains to be seen at last week’s $1.0766 low. While above it, and the mid- to late-December highs at $1.0736 to $1.0715, the medium-term uptrends remain intact. Further support can be found around the $1.0663 to $1.0658 16 to 28 December highs.
EUR/GBP little changed on record UK budget gap high
EUR/GBP slid back from Monday’s £0.8815 high and now trades below the £0.88 mark as the UK’s public sector net borrowing excluding public sector banks hit the highest December monthly figure since records began in 1993, mainly because of the government’s energy support scheme and an increase in debt interest payments.
The cross thus so far fell short of the £0.8828 November peak as well as the £0.8834 22 December high, above which sits more significant resistance between the December and current January highs at £0.8877 to £0.8897. Support remains to be seen along the 55-day simple moving average at £0.8733 and last week’s low at £0.8722. If slipped through, the 23 November high and 19 December low at £0.8701 to £0.8691 could once again be reached. Further down sits the 28 November high at £0.8676.
GBP/USD grapples with its $1.2446 December peak
The record high in UK public sector net borrowing (ex banks) hasn’t had much impact on the GBP/USD cross as it continues to grapple with its December peak at $1.2446. UK public sector net borrowing excluding public sector banks came in at a record high of £27.4 billion in December 2022, much higher than market forecasts of £17.75 billion and a gap of £17.6 billion in November.
The currency pair’s September advance from its $1.035 all-time low over the past week or so struggled to overcome its December high at $1.2446 which is not to say that this won’t happen in the near future, provided that the January support line at $1.2374 continues to underpin. Further minor support lies at the 16 January high at $1.2289. A rise and daily chart close above Monday’s $1.2448 high would engage the minor psychological $1.25 mark above which the 7 June 2022 high sits at $1.2599.
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