The euro-sterling cross advanced notably Wednesday as new COVID restrictions were announced in the country, sending the Pound lower.
At the time of writing, the cross was seen trading at around 0.8585.
On Wednesday, the UK PM Boris Johnson said the nation will move to COVID-19 “plan B”, with work from home encouraged and new face mask requirements.
“’Plan B’ designed to slow down the spread of Omicron variant,” the UK Health Minister Sajid Javid said in a statement on Thursday.
BoE lagging with rate hikes?
Following the decision, the investment bank Goldman Sachs shifted their Bank of England rate expectations in response to the latest surge in Omicron , with analysts across many of the top investment banks expecting to see the MPC delay their December rate hike to February 2022.
The GBP/USD pair reacted to the downside, dropping below the 1.32 level, printing fresh one-year lows. That move, combined with some strength in EUR/USD, sent the EUR/GBP cross above its 200-day moving average for the first time since January 2021.
Sterling traders will now focus on tomorrow’s UK manufacturing and industrial production data, which are expected to improve slightly month-on-month but worsen on the yearly basis. Trade balance data will also be released.
There are several ECB speakers scheduled for appearances on Friday, likely influencing the euro.
Daily chart now looks bullish
As long as the EUR/GBP cross trades above the 200-day average (0.8550), the short-term outlook seems bullish . The cross now needs a daily close above 0.8610 to start another medium-term leg higher toward April highs of 0.8720.
Alternatively, if the euro drops below the 200-day average, we might see a decline toward 0.8470.