- The daily upside in the cross met resistance near 0.8680.
- Brexit indecision keeps weighing on the British Pound.
- German IFO survey surprised to the downside in April.
The persistent selling bias around the shared currency stays well and sound in the middle of the week, prompting EUR/GBP to recede from the area of daily highs in the 0.8675/80 band.
EUR/GBP focused on EUR-weakness, Brexit
After a positive start of the week, the European cross have met quite a tough barrier just ahead of the critical 0.8700 the figure on the back of renewed and strong selling mood in EUR.
In fact, as investors keep selling EUR, negative results from today’s German IFO survey have been also adding downside pressure to the shared currency after Business Climate, Current Assessment and Business Expectations all came in below forecasts.
On the GBP-side, the lack of further progress in the Brexit negotiations have been collaborating with the neutral/bearish tone in the Sterling following failed talks between (still) PM Theresa May and the opposition.
What to look for around GBP
Brexit negotiations are expected to be the dominant driver for volatility and price action around the Sterling in the months to come. Recent positive data from the industrial sector and PMI were exclusively driven by companies stockpiling in case of a ‘hard Brexit’ outcome, morphing into a temporary relief for GBP although failing to allay concerns over the outlook on the UK economy and the currency in the longer run. In addition, the current steady stance from the Bank of England appears justified by below-target inflation figures, mixed results from key economic fundamentals and somewhat slowing momentum in wage inflation pressures, all adding to already rising speculations of a ‘no-hike’ this year.
EUR/GBP key levels
The cross is retreating 0.30% at 0.8647 and faces the next down barrier at 0.8626 (55-day SMA) seconded by 0.8612 (21-day SMA) and then 0.8502 (low Apr.3). On the other hand, a break above 0.8681 (high Apr.23) would expose 0.8722 (high Mar.21) and finally 0.8749 (100-day SMA).
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