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EURGBP Eyes January Low as BoE Decision Nears

EURGBP Eyes January Low as BoE Decision Nears

Nick Cawley, Strategist

EURGBP Dollar News and Talking Points

- Sterling continues to shine ahead of the latest BOE monetary policy meeting.

- Euro-Zone PMI data slips below expectations.

The Traits of Successful Traders and how to find the Number One Mistake Traders Make are just two of the most widely read reports in our Free Trading Guides.

EURGBP May Dip Back Below 0.87000 Shortly

The latest Euro-Zone-Markit PMI data failed to meet expectations Thursday, missing on the downside for all releases. The composite PMI for March fell to 55.3 from 57.1 and against expectations of 56.8, services fell to 55.0 from 56.2 and expectations of 56.0 while manufacturing fell to 56.6 from 58.6 and expectations of 58.1. While negative, the falls are from fairly lofty levels and still point to a robust Euro-Zone economy. The single currency edged lower against the British Pound, continuing a run of 14 consecutive daily falls.

On the other side of the pair, GBP traders are waiting for the latest Bank of England monetary policy announcement at 12:00 GMT. All policy settings are expected to be left unchanged but the accompanying statement may show a slightly hawkish twist, sending GBP even higher. It has been a good week for Sterling, and for BoE governor Mark Carney, with a transitional Brexit deal likely to be announced tomorrow, inflation slipping lower, unemployment hitting a four-decade low while UK wages are on the up, after nearly a year of negative real wage growth. Any hawkish talk from the BoE governor may have analysts pencilling in two UK rate hikes this year, pushing EURGBP back down to multi-month lows.

EURGBP Price Chart Daily Time Frame (May 2017 – March 22, 2018)

EURGBP Eyes January Low as BoE Decision Nears

Chart by IG

Retail Traders Remain Long EURGBP – A Bearish Contrarian Signal

Retail trader data show 59.7% of traders are net-long with the ratio of traders long to short at 1.48 to 1. The percentage of traders net-long is now its highest since Nov 18 when EURGBP traded near 0.85688. The number of traders net-long is 1.0% lower than yesterday and 46.1% higher from last week, while the number of traders net-short is 2.9% lower than yesterday and 25.8% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURGBP prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURGBP-bearish contrarian trading bias.

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What’s your opinion on EURGBP? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at nicholas.cawley@ig.com or via Twitter @nickcawley1.

--- Written by Nick Cawley, Analyst

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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