EUR/GBP jammed between German political uncertainty & UK ratings downgrade
|EUR/GBP is trading slightly lower at 0.8815 levels this Monday morning in Asia as investors assess the impact of the negative news flow from both ends - surging support for the far right party AfD in Germany and UK credit rating downgrade by Moody's.
Jamaica Coalition likely in Germany
The only realistic option left with Merkel is to form a coalition with he Free Democrats (FDP) and the Greens - dubbed ‘Jamaica coalition due to the colors of the three blocks (black/yellow/green). But it won’t be easy to put together as Merkel would have to find common ground with parties that have very different policies on issues such as tax cuts and deeper integration with Europe. Furthermore, the rise of the far right AfD is bad news for the EUR as well.
UK credit rating downgraded by Moody's to Aa2 rating from Aa1.
The credit rating was cut on Friday on concerns about the UK's public finances and fears Brexit could damage the economic growth. The ratings downgrade is keeping GBP demand under check.
Looking ahead - European desks may offer EUR on fears that Merkel would have a hard time financing the bailout packages for beleaguered Eurozone nations.
EUR/GBP Technical Levels
A break below 0.8774 [Sep 15 low] could yield a sell-off to 0.8743 [July 14 low] and 0.8714 [200-DMA]. On the other hand, a break above 0.8838 [1-hour 100-MA] would open doors for 0.8873 [1-hour 200-MA] and 0.89 [zero levels].
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.