EUR/GBP drops to fresh session lows, around mid-0.9000s
- EUR/GBP failed to capitalize on its intraday uptick to levels just above the 0.9100 mark.
- Dovish ECB expectations and a surge in COVID-19 cases in Europe weighed on the euro.
- Brexit-related uncertainties undermined the GBP and might help limit losses for the cross.
The EUR/GBP cross quickly retreated around 50 pips during the early European session and refreshed daily lows, around the 0.9055 region in the last hour.
The cross once again struggled to find acceptance above the 0.9100 round-figure mark, instead met with some fresh supply at higher levels and has now drifted into the negative territory. The shared currency's relative underperformance against its British counterpart could be attributed to the risk of a double-dip recession amid the second wave of coronavirus infections in Europe.
It is worth reporting that France announced a daily record of new coronavirus infections on Sunday, with the confirmed figure reaching 52,000. Separately, Italy imposed partial lockdown measures, which will remain in effect until November 24. Meanwhile, Spain has approved a state of emergency and announced a national curfew from 11 p.m. to 6 a.m. to contain the virus outbreak.
The developments further fueled speculations that the European Central Bank (ECB) will be pressed to extend the Pandemic Emergency Purchase Programme (PEPP) in December. This, along with expectations that the ECB will lower its economic projections, further took its toll on the common currency, which, in turn, was seen as a key factor exerting some pressure on the EUR/GBP cross.
The euro lost some additional ground following the release of German Ifo Business Climate Index, which eased to 92.7 in October as compared to the 93.2 previous and missed consensus estimates pointing to a reading of 93.0. Adding to this, the IFO Expectations Index also fell short of expectations and came in at 95.0 for October as compared to the previous month’s 97.4 and 96.5 anticipated.
Meanwhile, the downside is likely to remain limited, at least for the time being, as the GBP bulls might refrain from placing any aggressive bets amid persistent Brexit-related uncertainties. Even from a technical perspective, the EUR/GBP cross has been showing some resilience near 100-day EMA, which further warrants some caution before positioning for any further depreciating move.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
