EUR/GBP: a loaded cross on a key week for sterling traders

Currently, EUR/GBP is trading at 0.8646, down -0.08% on the day, having posted a daily high at 0.8677 and low at 0.8625.

EUR/GBP is starting out the week mixed. It is a busy week ahead for the cross and is a loaded trade with Article 50 on the chopping board this Wednesday surrounded by a number of speeches from the ECB. 

US Dollar finds support near 200-day sma

Both the euro and pound are much higher against a fragile dollar. For the pound, UK inflation is rising through the roof and dangerously close to requiring a rate hike from the BoE while retail sales last week was a key result showing how robust the consumer is feeling despite the Brexit uncertainties. However, real yields in the UK could become an anchor on the pound advancing too strongly although should there be a sigh of relief when Article 50 is triggered and positive sentiment around Brexit negotiations,  CFTC data confirm the market is still very short and if the pound is unwound, the upside could have some strong short-term momentum behind it. Q4 GDP revisions and current account data are on due Friday as further catalysts for sterling this week.

For the euro, we have seen better economic data, German voters voting for the status quo and a lack of disquiet about the French elections all allow post November 8 moves to be unwound, as explained by Kit Juckes, an economist at Societe Generale. "Emmanuel Macron's odds of winning the French elections, calculated by Bloomberg from Oddschecker.com, are now above 70%. There isn't much on the calendar this week for Europe, with money supply and IFO this morning, preliminary CPI data in Germany and Spain Thursday, France and Italy Friday," - Kit Juckes.

EUR/GBP levels

EUR/USD retreats from 200-DMA hurdle near 1.09 handle

Commerzbank's near-term outlook for the cross is neutral, "Initial resistance lies at 0.8744 (downtrend) and we suspect that this will cap for now. Above 0.8800, there is scope to tackle the 0.8852 January high. We look for the downside currently to be limited by the 200-day ma at 0.8566."