EUR/GBP eyes retest of multi-month lows at 0.8830

EUR/GBP has been pressing to the downside in recent trade, reversing fleeting Asia Pacific session gains that saw the pair move briefly above 0.8900 to drop to the 0.8850s. Not far to the downside is multi-month lows at 0.8830 set last week, an area the bears will have their eyes on.

Driving the day

No specific fundamental catalysts are clearly behind Tuesday’s downside in EUR/GBP. Some have cited the influence of month-end flows that may be going in favour of sterling (GBP has also seen gains versus USD in recent trade). Others are pointing to ongoing angst within the Eurozone regarding news of recent vaccine delivery delays from AstraZeneca and Pfizer that puts the bloc’s vaccination efforts even further behind that of the UK and EU’s. The EU has been lobbying the two pharmaceutical giants regarding these production delays over the last few days and is pressuring them to divert deliveries from elsewhere back to the EU.

Some analysts are also pointing to ongoing Italian political risk as potentially weighing on EUR sentiment. Italian PM Giuseppe Conte “tactically” resigned on Tuesday and hopes to receive a new mandate to form a new government from Italian President Sergio Mattarella. The fear is that Conte might fail in his bid to form a new government, which could trigger another general election, which could potentially hand gains to anti-EU Italian Parties such as Matteo Salvini’s La Liga.  

Looking Ahead

There is not much by way of data to be concerned about for the rest of the week out of the UK. Focus will instead by on the rate at which the country continues to vaccinate its population and the spread of the virus. Across the English Channel, EUR traders will be watching preliminary Q4 GDP numbers out of Germany, Spain and France, as well as preliminary December CPI numbers out of Germany and Spain. EU vaccination and lockdowns and travel restriction will, of course, also remain of crucial importance.