EUR/GBP edges back up towards 200DMA at 0.8580 amid broadly subdued trade conditions

Amid a lack of any meaningful fresh fundamental catalysts on Thursday aside from a slightly softer than expected UK GDP report, EUR/GBP has continued to nudge higher whilst also continuing to respect weekly ranges. The pair looks set to post a third consecutive daily gain of about 0.1%, during which time it has edged higher from weekly lows posted back on Tuesday at around 0.8520 to current levels just under 0.8570. That still leaves the pair some way below recent highs from earlier in the week/the end of last week around the 0.8590 mark. The 200-day moving average at 0.8580 seems to be offering some resistance, just as the 50DMA (just above 0.8520) earlier in the week provided the foundations for a rebound.

Brexit Update

UK PM Boris Johnson is set to travel to Paris on Friday to meet with French President Emmanuel Macron, where fishing access for French boats in UK waters will likely be at the top of the agenda. The UK’s broader disagreement with the EU over the implementation of the Northern Ireland protocol will also be an important topic for discussion. Political analysts still think there is a strong likelihood that the UK will trigger Article 16 to unilaterally override parts of the protocol, potentially triggering a broader trade/legal conflict with the EU. But there were reports that the EU was prepared to improve its offer on checks on goods going in and out of Northern Ireland, an offer that might be presented to the UK PM on Friday.

For now, FX markets are shrugging off Brexit risk. ING’s fair value model for EUR/GBP shows the pair to only be trading with about 1.0% “Brexit” risk premium, versus over 5.0% at some points during 2019. “With UK CPI heading to the 5% area into April, keeping BoE tightening prospects on the front-burner, we are happy with an end-year EUR/GBP target near 0.8500, and lower levels as 2022 progresses,” says the bank.