The Sterling over took the euro to a yearly low after the United Kingdom reported an unemployment rate that dropped to five-year lows of 7.1 percent, a tenth percent from the seven percent target made by Bank of England (BoE) Governor Mark Carney. Traders are bullish on the pound in hopes that the BoE will increase the benchmark rate once seven percent is reached. The Claimant change report showed a decline of 24K claiming unemployment, although it was lower than the decline of 33K expected.
Thomas Kressin, head of European FX at Pacific Investment Co., said “given the relative strong cyclical performance of the U.K. economy, sterling currently appears to be the most attractive currency in the G-4 [dollar, yen, euro, Sterling].” Both the dollar and Sterling have preformed well of late.
Currently trading at .8172, the EURGBP has been in encapsulated by the larger downward trend line created in early November, but the down has been a choppy one with short falls and quick rallies. However, the positive data out of the United Kingdom continue to overshadow the eurozone’s here-and-there economy.
The price action on the daily chart has been contained within a downward channel created on December 17 at .8465. The current daily candle is looking to breach the supporting trend line near .8175. A close below, or even at the bottom of the range, will continue to put pressure on the EURGBP.
On January 6, the EURGBP technicals initiated a target of .8155 was made at .8312. It was a hard fought battle down, but the primary economic thesis prevailed.