- EUR/GBP was hit on the UK construction PMI beat but has rebounded.
- There is now some scope for a break of 0.89 the figure
EUR/GBP is currently trading at 0.8844 with a high of 0.8862 and a low of 0.8829 while sterling's price action has been a little more constructive after Friday’s sharp rebound from the 1.3050 area in cable.
EUR/GBP was hit on the UK construction PMI beat, (backing the hawks advocating a BoE rate hike in Aug) and was sent to a fresh intra-day low before recovering ground despite the continuing doubts over German politics. BoE MPC “hawk” Saunders remarked that UK rates may have to rise faster than markets expect as the UK economy is running out of slack. At the same time, the UK Construction PMI rose to 53.1 in Jun, bettering expectations of an unchanged report from May’s 52.5. As analysts at Scotiabank noted, "this was the strongest reading in the index since Nov last year (and follows yesterday’s stronger than expected Manufacturing PMI reading (54.4)."
Watching the EZ and politics
From the EZ, Italy's economic minister said they will work to reduce debt. While, for German politics, the issues there have dragged on the EUR performance of late. However, Chancellor Merkel appears to have regained control over her junior coalition partners which should ease new election worries. "Eurozone growth momentum may have moderated somewhat over the past quarter or so but the economy continues to grow above potential which supports the outlook for the ECB to cut off asset purchases late this year and move to tighten rates in 2019. We remain longer-term bullish on the EUR," analysts at Scotiabank explained.
EUR/GBP levels
EUR/GBP advanced through the 200-D SMA at 0.8821 on 27th June and also the key 0.8842 prior, 3rd May 2018. There is now some scope for a break of 0.89 the figure. The 0.8969 recent high and the 0.9034 October 2017 high come as key upside targets. On the flip side, 0.8700 and the double bottom lows are exposed at 0.8697, guarding the downside support of the descending channel.
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