- EUR/GBP regains 0.9000 and beyond, new 2-week highs.
- The selling pressure around GBP lifts the cross.
- The Irish backstop remains in centre stage.
The selling bias around the British Pound has gathered extra pace in the past hours and is now pushing EUR/GBP further north of the psychological 0.90 handle, or fresh 2-week highs.
EUR/GBP looks to Brexit, UK politics
The European cross has started the week on a positive note and is extending the recovery after bottoming out in the 0.8890 region soon after Boris Johnson was elected new UK PM.
However, Brexit jitters and the increasing likelihood of a ‘no deal’ scenario have all returned to the fore and keep weighing on the Sterling following B.Johnson rhetoric around the Irish backstop and his request for the EU to drop it, a condition sine qua non to resume talks between Brussels and London.
In the docket, BoE’s Consumer Credit expanded £1.04 billion during June and Mortgage Approvals ticked higher to 66.44K in the same period, both prints surpassing initial estimates.
Despite the up move, the cross is expected to remain under scrutiny in light of the potential dovish move from the ECB in the next weeks. Later this week, the single currency should also be under pressure following the key FOMC event (Wednesday).
What to look for around GBP
The Sterling remains under heavy pressure and it has quickly faded a relief rally soon after Boris Johnson was elected new UK Prime Minister. Investors’ attention has now returned to UK politics amidst rising bets of a ‘no deal’ scenario, while any progress in the negotiations between London and Brussels is expected to exclusively gyrate around the Irish ‘backstop’ issue. Back to the UK economy, poor results from key fundamentals continue to add to the sour prospects for the economy in the months to come and collaborate further with the bearish view on the currency. On another direction, the overall tone from the BoE appears to have shifted towards a more dovish gear, while markets have started to price in the likeliness of a rate cut at some point in Q3/Q4.
EUR/GBP key levels
The cross is gaining 0.37% at 0.9017 facing the next barrier at 0.9051 (monthly high Jul.17) seconded by 0.9092 (2019 high Jan.3) and finally 0.9098 (2018 high Aug.28). On the downside, a breach of 0.8904 (55-day SMA) would expose 0.8891 (monthly low Jul.25) and then 0.8872 (low Jun.20).
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