EUR/GBP eases from tops, back near 0.8840 post-UK GDP

  • EUR/GBP comes under pressure near the 0.8840 region.
  • Preliminary UK Q1 GDP contracted 2.0% QoQ and 1.6% YoY.
  • UK’s Industrial Production contracted at a monthly 4.2% in March.

The not-so-bad-as-expected UK data give some support to the sterling on Wednesday and put EUR/GBP under some downside pressure around 0.8840.

EUR/GBP keeps navigating in 3-week highs

EUR/GBP is partially fading Monday’s sharp advance to multi-week highs in the area above 0.8800 the figure, flirting at the same time with the key resistance at the 55-day SMA.

The cross came under renewed pressure on Wednesday via a firmer note in the British Pound, all after the UK economy is seen contracting a tad less than initially predicted during the January-March period. In fact, flash GDP is expected to contract 2.0% inter-quarter and 1.6% from a year earlier. On a monthly basis, the GDP contracted at a monthly 5.8%.

Additional data saw Industrial Production contracting at a 4.2% during March and Manufacturing Production dropping 4.6% MoM. The trade deficit, in the meantime, widened to £12.51 billion during the same period.

What to look for around GBP

The recovery in the British Pound appears to have met quite a significant barrier around the 1.2600 neighbourhood vs. the greenback (200-day SMA) and the 0.8860 area vs. the euro (April peaks). Moving forward, the sterling is expected to remain under pressure against the backdrop of rising scepticism over the handling of the coronavirus crisis by the UK government and the potential re-opening of the economy, all amidst the forecasted deep recession the country is expected to face in the first half of the year. Further weakness is expected to hit the quid over the prospect of hard UK-EU trade negotiations and the tangible probability that the BoE could pump in extra stimulus at the next meeting.

EUR/GBP key levels

The cross is losing 0.21% at 0.8828 and a drop below 0.8716 (200-day SMA) would expose 0.8670 (monthly low Apr.30) and then 0.8661 (100-day SMA). On the upside, the next resistance is located at 0.8854 (monthly high May 13) followed by 0.8863 (high Apr.6) and finally 0.9019 (monthly high Oct.20 2019).

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