- EUR/GBP moves higher and tests the 0.90 handle.
- The Sterling resumes the downside and lifts the cross.
- New UK PM to be announced tomorrow.
The increasing selling bias around the British Pound is sustaining the up move in EUR/GBP to the very doorsteps of the psychological 0.9000 handle.
EUR/GBP looks to UK politics, data
Sellers are now gathering en masse around GBP following news that many more ministers could resign in the next hours after UK Foreign Office minister Sir A.Duncan stepped down earlier in the day.
The Sterling remains under pressure ahead of the announcement of the new Prime Minister tomorrow. It is worth recalling that former London mayor and known Brexiteer B.Johnson is the favourite to succeed Theresa May at Number 10.
On another front, NIESR think tank said there is around 40% probability of a ‘no deal’ scenario, adding that Brexit uncertainty could have already pushed the domestic economy into recession while the country is expected to stagnate next year in case of an orderly no deal.
In the data space, UK’s CBI Industrial Trends Orders are due tomorrow, although the most salient events will be this side of the Channel with the ECB gathering and the releases of advanced PMIs in core Euroland and the German IFO.
What to look for around GBP
UK politics continue to dictate the sentiment around the British Pound for the time being, while all the looks will be upon the announcement of the new PM tomorrow. On the Brexit side, the ‘no deal’ option remains well on the table and amidst rising odds. Back to the UK economy, poor results from key fundamentals continue to add to the sour prospects for the economy in the months to come and collaborate further with the bearish view on the currency. On another direction, the overall tone from the BoE appears to have shifted towards a more dovish gear, while markets have started to price in the likeliness of a rate cut at some point in Q3/Q4.
EUR/GBP key levels
The cross is advancing 0.29% at 0.8997 and faces the next hurdle at 0.9051 (monthly high Jul.17) seconded by 0.9062 (high Jan.11) and finally 0.9092 (2019 high Jan.3). On the downside, a breach of 0.8955 (low Jul.22) would open the door to 0.8919 (low Jul.2) and then 0.8872 (low Jun.20).
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