- EUR/GBP gained positive traction for the second consecutive session on Tuesday.
- Increasing risk of a no-deal Brexit undermined the sterling and remained supportive.
- The ECB’s concern about the euro’s exchange rate level might cap any strong gains.
The EUR/GBP cross jumped to fresh two-week tops during the early European session, with bulls now looking to build on the momentum beyond the 0.9000 psychological mark.
The British pound retained its bearish bias on Tuesday amid increasing risk of a messy end to the Brexit transition period on December 31. This, in turn, was seen as one of the key factors that assisted the EUR/GBP cross to gain traction for the second consecutive session.
It is worth recalling that the UK Prime Minister Boris Johnson threatened to walk away from Brexit talks if a deal is not reached by mid-October. This comes on the back of comments by the UK Chief Brexit negotiations David Frost that Britain was not scared of a no-deal exit.
The EU's chief negotiator, Michel Barnier hit out at his British counterpart and blamed that the British want the best of both worlds. The not so comforting Brexit-related headlines come ahead of the eighth round of Brexit negotiations and increased bets of a no-deal Brexit.
On the other hand, the shared currency struggled to gain any meaningful traction and was being weighed down by the ECB’s concerns over the exchange rate level. This might hold the EUR/GBP bulls from placing any aggressive bets ahead of the ECB monetary policy meeting on Thursday.
With the GBP price dynamics acting as an exclusive driver of the EUR/GBP pair's momentum, the market attention will be on headlines coming out of the post-Brexit trade talks. In the meantime, Tuesday's publication of revised Eurozone Q2 GDP print and Employment Change will be looked upon for some impetus.
Technical levels to watch
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