In an interview with Spanish newspaper La Vanguardia, European Central Bank (ECB) Vice President Luis de Guindos said that the European economy will suffer a more severe recession than the global economy. He added that it’s possible to see some signs of growth starting in the third quarter of 2020 but a genuine recovery in economic activity is not possible before 2021.
The ECB announced a massive economic stimulus plan to support the economy amid the COVID-19 pandemic. Guindos also said that the additional government spending to counter the economic impact of the virus could be as high as 1.5 trillion Euro. European Finance Ministers have also agreed on a joint package of 540 billion Euro.
Eurozone has been hit hard by the pandemic. Nationwide lockdowns across major economies like Germany, Spain, France, and Italy have tremendously increased the risk of recession and high unemployment. According to the International Monetary Fund, Spain’s unemployment rate could reach 20.8% this year.
In the UK, Government announced to extend its overdraft facility at the Bank of England to support struggling businesses and furloughed workers. The facility was last used during the 2008 financial crisis. Euro investors are keeping a close eye on the economic impacts in the Eurozone area as well as the UK. EURGBP struggled near the 0.87000 level after a failed recovery attempt above 0.87500. The currency pair is currently trading near its one-month low.
On the technical side, EURGBP on the 4-Hour timeframe has been following a downtrend since April 7. The pair registered the lowest level of the period under study at 0.86810 on April 14. As of writing, the EURGBP is hovering around 0.87150 with negative Moving Average Convergence Divergence and Momentum below the 100 level.
The pair is currently trading below the 50-period simple moving average with Relative Strength Index below 50 which supports the recent bearish price move. Resistance level lies at 0.88643 while the support level lies at 0.86810. Bears are trying to drag the price below the 0.86000 level, but a push above 0.88000 could strengthen the argument for a bullish move.
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Written on 16/04/2020 by Bilal Jafar, FX Trainer at FXTM
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