The bull move in EURGBP never really went away and the pair may be simply have been coiling in a tight range for a move higher in the coming days, assuming tomorrow’s BoE Minutes don’t throw up any obstacles.
EURGBP is politely pausing near the top of the range toward 0.8600 and may be ready for a swing higher still from here as the market begins to fret what the arrival of Carney might mean for the pound.
Looking at the weekly chart, we can see that the pair has been in an extended bout of consolidation after the enormous move up that really got under way at the beginning of the year. The highest weekly close has been right around the current spot level in the high 0.8500’s.
The daily chart below shows how critical the 0.8600 area is, so let’s see how the pair behaves as it interacts with this area in the coming days. Momentum suggests a higher risk of a break higher now that we managed to sustain the rally late in the day. A close and hold above 0.8600 could touch off a new rally that brings the 0.8750 levels into view in coming days, or even higher levels.
Keep in mind that tomorrow will see the BoE minutes of the final meeting under Mervyn King, not likely to have been a meeting that produced particularly noteworthy developments. Still, signs that a member or two is beginning to see a rosy scenario for the UK economy based on recent data strength could possibly move the needle. Ahead, the anticipation is more about what the arrival of Carney will bring. One would think that a communication with the market on the actual day of the BoE meeting might be an idea worth consideration, even when there are no changes of interest rates or asset purchases.
On the chart below I have marked the days that saw the BoE minutes and Quarterly Inflation reports over the last six months. As you can see, sometimes these are interesting days and sometimes they are not… The BoE last shifted its asset purchase target in July of 2012.
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