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Citi: EUR/GBP Drops Below 0.86 in Bearish Technical Break
Summary
Analysts at Citi report that the EUR/GBP currency pair has experienced a bearish technical break, falling below the 0.86 level. The bank suggests this move could signal further declines, potentially toward the 0.8450-0.85 range.
The Euro to British Pound (EUR/GBP) exchange rate has fallen below the key 0.86 level, a move that analysts at Citi are describing as a significant bearish technical break. This development has prompted the bank to suggest that further declines for the currency pair may be possible.
Citi had previously forecast that the pair could move lower, targeting a range of 0.8450-0.85. This outlook was based on the potential for increased foreign investment in UK government bonds, known as gilts, which would strengthen the pound against the euro.
However, the bank noted that its proprietary data, which tracks real money flows as an indicator for overseas gilt purchases, has not yet shown sustained buying of the British pound. Despite this, Citi believes the technical breakdown below 0.86 is significant enough on its own to support a tactical trade, even without confirmation from relative rates.
AdLooking ahead, the bank suggests the downward move could have more room to run if the spot price continues to fall. Citi also identified a risk that market sentiment could begin to favor puts on the EUR/GBP, which are bets on a price decline. The bank continues to view foreign investment flows into gilts as a primary driver for the currency pair’s direction.