Sunday, June 26, 2022

EURGBP Daily market is moving in the Descending channel and reached the lower high area of channel.

Where is EURGBP Today

EURGBP has been considerably impacted by the current economic conditions around the world. This is mainly due to being tied with the EU as a result of the Euro. The Euro has been one of the most unstable currencies ever since the war began in Ukraine. Looking at a shorter time frame, it may seem as though this currency pair is in bearish markets but this is just temporary.

EURGBP 30 Minutes market moving in ascending channel and breakout from the channel. 1

EURGBP 30 Minutes market moving in ascending channel and breakout from the channel.

Looking at a larger time frame, it is quite evident that the EURGBP markets is following an upward trend. EURGBP is currently teasing around the 0.842 region and analysts predict that this pair may still trend further upwards into higher market values.

Russia Cuts Oil Supply

Russia just does not want to stand down in this war against Ukraine despite several nations cutting off ties with this superpower due to this very reason. Half the world has deliberately cut off its oil and gas supply from Russia in order to make the Russian economy suffer. They hoped this would make Russia stand down in order to prevent their economy from collapsing. For the other half of the world that was still surviving on Russian oil, Russia demanded they pay for their supply in Roubles. This goes against the contractual terms it had with these nations which stated that payments would be made in dollars. Certain EU countries refused to pay in Roubles which caused Russia to cut off its oil supply. These nations include Poland and Bulgaria.

EURO Russia promised to supply Gas demand to the Eurozone until Demand was completed.

Bulgarian Energy Minister Alexander Nikolov was furious given this situation. He released a statement in which he says, “Because all trade and legal obligations are being observed, it is clear that at the moment the natural gas is being used more as a political and economic weapon in the current war.” European Commission President Ursula von der Leyen also released a statement on the current ordeal. She reveals, “The announcement by Gazprom that it is unilaterally stopping delivery of gas to customers in Europe is yet another attempt by Russia to use gas as an instrument of blackmail. This is unjustified and unacceptable. Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand to pay in Roubles, taking direct aim at European economies in its toughest retaliation so far against international sanctions over the war in Ukraine.”

EURGBP 4 Hour market has reached the lower high area of the descending channel.

EURGBP 4 Hour market has reached the lower high area of the descending channel.

ECB Rate Hike

For a few weeks now, the ECB has been throwing hints at increasing the next short-term interest rates up to 0%. This would be the first time in quite a long time that their interest rates would’ve left the negative range. This rate hike was further confirmed when ECB’s Lagarde held a conference where she revealed that the interest rates would need to be increased in order to bring inflation under control. Lagarde is known for being quite neutral and not revealing much details about ECB’s upcoming monetary decisions until they actually happen. This is why this hike was almost certain to happen. However, the recent turn of events where Russia decided to stop supplying Poland and Bulgaria with oil has significantly put a dent in these plans. The ECB is now quite confused on how to move forward as this oil supply shortage is going to cause further economic tensions in the European Union which is going to make it rather difficult to increase the interest rates without hurting the economy.

European Central Bank ECB

Analysts at Commerzbank have been studying this situation and deciding what move would bring a better outcome for the EU. They state, “If Russian gas supplies to Europe were to stop on a large scale, large parts of the EU, especially the euro area, would be threatened with recession. Then things would get exciting. Because the ECB would then be in a much more uncomfortable predicament than it has been so far. Would it still raise its key rate in view of the inflation trend? Or would it call off the announced rate hikes to ease the pain in the real economy? If the ECB call off the announced rate hikes we would have the perfect storm for EUR exchange rates: a recession that would only affect Europe, not the US and other economies, high inflation and a central bank that does not fight it, but keeps the interest rate (and thus the EUR carry) in negative territory, while other central banks continue to raise their key rates.”

BOE Rate Hike

The Bank of England has been one of the very few institutions that has taken the current inflation crisis very seriously. They have consistently been increasing their interest rates in order to combat this ongoing crisis. In fact, the Bank of England has increased their interest rates much more than any other institution as of right now. And it is expected that in the next monetary policy meeting, they are set to increase their interest rates once again. Analysts predict that the rate could reach as high as 3%.

UK GDP data shows underweight progress as expected 1.5 per cent by an economist but 0.8 came

Sanjay Raja, Chief UK Economist at Deutsche Bank, has revealed his thoughts on the current inflation crisis impacting the country. He states, “I expect gilt sales to begin in August or September and to run at about 3.3 billion pounds a month through 2022 and 2023. Combined with 72 billion pounds of gilts maturing this year and next, that would add 15-25 basis points to long-dated bond yields – a small rise in borrowing costs given the 90 basis-point rise in 10-year gilt yields so far this year. Overall, the wider impact on growth and inflation from the sales was likely to be very small, to begin with. The BoE has said it wants its gilt sales to be predictable and avoid market disruption, and that interest rates will remain the main tool for controlling inflation.”

Shanghai COVID Surge

In other news, Shanghai is finally recovering from the surge in COVID cases that had taken over the city this past month. This surge had seriously impacted the oil supply around the world as China is one of the major producers and exporters of this valuable commodity. Due to this surge in cases, production had to be stopped or slowed down for quite some time. Now that it’s back up and running, traders are hopeful that the oil demand around the world will be met with a considerable supply from China as well.

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