EUR/USD and GBP/USD regain some losses while EUR/GBP comes off two-year high
EUR/USD and GBP/USD regain some losses while EUR/GBP comes off two-year high as the Bank of England pledges to buy £65 billion worth of bonds to calm financial markets and avert a financial crisis.
EUR/USD bounces off lows as US dollar sees sharp decline
EUR/USD rapid sell off by over 6% from its mid-September high to levels last traded in June 2002 amid a rapidly rising US dollar on flight to quality flows is taking a breather following the Bank of England’s (BoE's) bond-buying pledge to calm financial markets and avert a financial crisis on Wednesday.
Moving away from its previous quantitative tightening policy, the BoE said on Wednesday that it was setting aside £65 billion to buy bonds until mid-October to ease pressure on pension funds and insurance companies which led to a fall in the US dollar and benefitted EUR/USD.
EUR/USD thus recovered from fresh 20-year lows at $0.9536, made slightly below key support seen between the June 2000 and January 2001 highs and the September 2002 low at $0.9698 to $0.9593, and managed to heave itself back up to $0.975 before coming off again Thursday morning. Below $0.9536 lies the September 2001 high at $0.9331. Minor resistance above $0.975 can be found between the one-month downtrend line and the 6 September low at $0.986 to $0.9865.
EUR/GBP consolidates below its two-year high
EUR/GBP’s intraday rally by some 6% to £0.9283 on Monday, close to the £0.9291 September 2020 high, on the back of the biggest tax cuts in the UK in 50 years following last Friday’s mini budget, has been followed by a consolidation period due to the BoE intervening and buying bonds.
It stated 'were dysfunction in this [government bond] market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.' The BoE went on to say 'in line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses' which calmed the EUR/GBP exchange rate.
Following the UK central bank’s intervention, EUR/GBP slid back below the minor psychological £0.9 mark and briefly traded as low as £0.8853 before consolidating around the £0.895 level. Minor resistance can now be spotted at Wednesday’s £0.9065 high and support below £0.8853 at the 19 September high at £0.8787.
GBP/USD range trades above its $1.035 all-time low
Following the UK’s aggressive fiscal stimuli mini budget on Friday, GBP/USD dropped by over 7% and slid below its 1985 low to a record low at $1.035 before regaining some of its recent losses on short covering trades amid the BoE’s £65 billion bond buying announcement on Wednesday in order to stabilise financial markets.
GBP/USD currently trades in technical no man’s land between the $1.035 record low and the minor psychological $1.1 level.
Above it minor technical resistance can only be spotted between the 7 and 16 September lows at $1.1351 to $1.1406 while immediate support can be found at Wednesday’s $1.0541 low.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market.
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.