EUR/GBP Tanks on UK Economic Recovery Hopes as Cryptocurrencies Remain Under Pressure

by FX EA Review
EUR/GBP Tanks on UK Economic Recovery Hopes as Cryptocurrencies Remain Under Pressure
  • The British pound is strengthening across the board on the easing of the UK COVID-19 threat level.
  • US equities remain under pressure ahead of key inflation data on Wednesday.
  • Oil prices are edging lower as cryptocurrencies remain under pressure following the Dogecoin plunge.

The EUR/GBP pair fell to three-week lows in the aftermath of the UK downgrading its COVID-19 threat level from 4 to 3. The net effect was the sterling pound strengthening against the common currency, which has been resilient against other majors in recent weeks.

The pair has since dropped to lows of 0.8600, a critical support level. A breach of the support level could leave the pair susceptible to further declines, with the next support level seen at the 0.8460 level.

EUR/GBP chart

The initial indication is that EUR/GBP could continue to edge lower amid growing confidence about the UK’s economy. A successful vaccination campaign has once again fuelled optimism that the UK economy could enjoy accelerated recovery from the slowdown triggered by the pandemic.

A plethora of impressive economic data has continued to support sentiments about UK economic recovery. House prices rose by the fastest rate in April. The economic think tank NIESR has also raised its growth forecast for the UK affirming economic recovery hopes.

AUD strength

The Australian dollar is another currency strengthening across the board amid growing optimism about economic recovery. The posting of impressive retails sales for March, which were up 1.3%, is the catalyst fuelling strength in the AUD.

AUD/CAD chart

The AUD/CAD has been trading higher amid the broader Australian dollar strength. The 0.9400 level has emerged as the immediate support level that supports upside action, with 0.9500 the immediate resistance level.

Oil pullback

In the commodities market, oil prices continue to retreat from the $66 a barrel level. The drop came amid declining fears of a prolonged outage at the largest US fuel pipeline system. US WTI fell by as much as 0.94% to $64.31 a barrel as Brent crude fell 0.82% to $67.70 a barrel.

Oil prices chart

Oil prices had rallied at the start of the week after a cyber-attack disrupted operations at the Colonial Pipeline in the US. The company, which transports more than 2.5 million barrels a day, was forced to shut down operations last week following the cyber-attack.

Indices and ETF sell-off

A slide in US stocks that began on Monday persisted on Tuesday, with futures edging lower by more than 1%. The NASDAQ was the biggest loser going down by more than 1% in pre-market trading amid growing inflation jitters.

NASDAQ 100 index chart

Growing fears that a strong inflation reading could prompt the Federal Reserve to alter its monetary policy is the latest tailwind taking a toll on equity sentiments. Stocks had rallied on Friday as disappointing job reports averted suggestions that the FED could hike interest rates.

Inflation jitters are forcing investors to exit growth stocks in favor of cyclical, resulting in the S&P 500 also coming under pressure.

ETFs with great exposure to growth stocks remain under pressure in the ETF market amid the broader market sell-off. Ark Innovation, Cathie Wood’s flagship ETF, has been the biggest casualty tanking by more than 5% at the start of the week.

Ark Innovation ETF

Ark Innovation ETF is now down by more than 30% year to date and 13% down for the month. The ETF has been under pressure on some of its biggest holdings led by Tesla and Square tanking.

Cryptocurrencies sell-off

In the cryptocurrency market, the bullish momentum in Bitcoin and Ethereum is slowly dissipating. The two cryptocurrencies are struggling to edge higher against the dollar, with Bitcoin the biggest casualty.

BTC/USD chart

Bitcoin sell-off persisted on Tuesday, with the crypto tanking by more than 1%. After struggling to take out the $60,000 resistance level. Bears appear to be in control, eyeing further downside action. Dogecoin is another cryptocurrency struggling to bounce back after a 30% plus sell-off over the weekend.

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