Article by ForexTime
The EUR/GBP cross is gaining momentum as the currency pair corrects its most recent down move. The euro has been under significant pressure stemming from divergent central bank policies where the ECB will likely need to move to a full-blown QE program while the Bank of England is considering its first date for interest rate tightening.
ECB Vice President Constance was on the tape on Wednesday, saying that “the overall purchasable amount of ABSs and covered bonds is sufficient to ensure that asset purchases can be carried out on a large scale”, although he added that the amounts that will be able to buy will be lower than the theoretical amount”. He said that of the total inventory of 1.2 trillion of covered bonds about 600 billion are eligible and that 690 billion of ABS around 400 billion are eligible.
In economic news, the U.K. Halifax house prices rose 0.6% month over month in September, after stagnating in the previous month. The annual rate eased slightly, but remained very strong at 9.6%. There are some signs that the boom in the housing market is starting to slow down, although the still elevated levels of price increases are keeping the Bank of England eying exit steps from the very accommodative policy. Halifax said that weak wage growth and the possibility of an interest rate hike appear to have dampened housing demand and that a moderation in growth looks likely during the remainder of the year and into 2015 as supply and demand become more balanced.
The technical picture shows that momentum on the EUR/GBP has turned positive after the currency pair recaptured support near the 10-day moving average at 0.7828. The MACD (moving average convergence divergence) index generated a buy signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.
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