EUR/GBP drops to weekly lows near 0.9050
|- EUR/GBP loses further ground and recedes to 0.9050.
- The Sterling stays firm on positive Brexit headlines.
- Pound rallies as EU could soften its position on WA.
The now increasing buying pressure around the Sterling is forcing EUR/GBP to fade part of the recent recovery and return to the mid-0.90s.
EUR/GBP weaker on Brexit news
Some positive developments on the Brexit front keep the hopes high on the likeliness of an eventual deal. In fact, and following recent meetings between UK PM B.Johnson and EU leaders (A.Merkel, E.Macron), it has emerged the chance that the EU could loosen its hard stance regarding a modification of the original Withdrawal Agreement (WA), including options for the Irish backstop (as long as these options are realistic and immediately operable).
Against this backdrop, investors shifted their focus back to the Sterling and encouraged GBP to leave behind the area of recent lows vs. both the Greenback and the single currency.
In the docket, UK Gross Mortgage Approvals ticked higher to 43.3K while BoE’s S.Tenreyro is due to speak later. On the other side of the Channel, German final Q2 GDP came in at -0.2% QoQ and 0.0% YoY, putting EUR under extra pressure.
What to look for around GBP
The change of heart around the Sterling in past days has exacerbated recently following constructive meetings between B.Johnson and his EU peers, as the door now seems open to a potential London-Brussels negotiation via a modification of the Withdrawal Agreement and the crucial backstop. On another direction, the BoE kept the monetary conditions unchanged at its last meeting, although it refuses to factor in a ‘no deal’ scenario in its projections for the time being. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
EUR/GBP key levels
The cross is retreating 0.22% at 0.9064 and a drop below 0.9028 (low Aug.22) would expose 0.8891 (monthly low Jul.25) and then 0.8833 (200-day SMA). On the upside, the next resistance aligns at 0.9164 (21-day SMA) followed by 0.9183 (high Aug.20) and finally 0.9324 (2019 high Aug.12).
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