08.09.202011:30 Forex Analysis & Reviews: EUR/USD and GBP/USD: Euro and pound could decline amid super-soft ECB policy and continuous uncertainty over Brexit.

EUR / USD declined in the market yesterday, largely due to low activity and low volatility caused by the weekend and holiday in the United States.

Meanwhile, GBP / USD was also on a decline, but it was due to negative reports on Brexit, as the ultimatum delivered by Boris Johnson is very bad news for those who were still counting on a deal.

Even the report on German industrial production came up a bit weak, revealing a slowdown on growth rate last July. However, experts are expecting a spurt in August, as recent Ifo surveys and PMI data point directly to this likelihood. Unfortunately, excessive expectations could very much hurt the euro, since economic recovery is entering a more difficult and slower phase.

Anyhow, according to the data, industrial production in Germany increased by 1.2% in July, much lower than the expected 4.1%. It was the construction sector that suffered the most that month, dropping in production by 4.3%. However, this decline was offset by a jump in the manufacturing industry, as a 2.8% growth in the index was recorded. Thus, in total, compared to July 2019, industrial production in Germany has collapsed by 10.0%.

Many also forecast that the ECB will increase the scope and extend the implementation of its PEPP program, which inevitably puts more pressure on EUR / USD. This is because last week, it was noted that the sharp rise in euro creates quite a lot of problems for the European economy, so the regulator has to act more decisively in order to maintain the pace of recovery.

Thus, it seems that it's time to resort to super-soft monetary policy, and the ECB might do this at the upcoming meeting this Thursday. There, the ECB could increase the PEPP program by € 600 billion.

With regards to the technical picture of EUR / USD, a breakout from 1.1785 will lead to a larger drop to 1.1750 and 1.1710, but if the bulls were able to regain control of the market,. the pair may move towards 1.1865, where the bears will actively trade in the hopes of another bear market. The decisions of the ECB can help in this.

GBP / USD

The British pound continues to experience serious problems, and this time it is largely due to uncertainty around Brexit.

As of the moment, negotiations for a deal are still underway, however, yesterday, UK Prime Minister Borish Johnson set an ultimatum, saying that the UK may withdraw if both parties still fail to reach an agreement by October 15.

Thus, the pound was at a difficult position since yesterday, refusing to even rise a little bit in the market. Bears are ahold of GBP/USD, and if the quote further declines below 1.3115, price will reach the lows 1.3060 and 1.3000. The pound will only increase if the bulls manage to consolidate the quote above 1.3315.