Societe Generale’s Kenneth Broux reports that the EUR/GBP currency pair has experienced a significant decline, falling to the 0.84 handle, its lowest level since June last year. This represents a 4.5% drop since November, following the breach of a Head and Shoulders neckline at 0.8610, which has extended the downward momentum in the cross [1]. The move is described as 'stretched,' with Broux noting that the scale of the decline is difficult to justify based on bond spreads, suggesting that hedging flows, central bank reserve rebalancing, or conversion flows in a thin market may be driving the price action [1].
Technically, the next projections for EUR/GBP are flagged near 0.8435, while the peak achieved earlier this week at 0.8545 is seen as interim resistance should a brief rebound occur. Further downside targets include the May 2025 trough near 0.8365/0.8350 [1]. Despite the sharp move, there are no clear signals of a meaningful rebound at this stage, although a brief bounce could encounter resistance at 0.8545 [1].
The rush into sterling has surprised many in the G10 FX space, with both GBP/USD and EUR/GBP showing notable momentum that warrants closer attention. The market reaction has been pronounced, but the underlying drivers appear to be more technical and flow-related rather than fundamental shifts in bond spreads or economic data [1].
CONCLUSION
The British Pound's surge against the Euro has pushed EUR/GBP to its lowest level since June 2023, with a 4.5% drop since November. While technical projections suggest further downside is possible, the move is seen as stretched and primarily driven by market flows rather than fundamentals. Market participants should monitor for potential rebounds, but resistance remains at 0.8545.