EUR/GBP firmer, opens the door for a test of 0.9000

  • EUR/GBP moves to new multi-month tops beyond 0.8970.
  • B.Johson remains the frontrunner in the race to succeed T.May.
  • German official said there is no chance to renegotiate withdrawal deal.

The selling pressure around the British Pound stays well and sound today and is now helping EUR/GBP to climb further and print fresh 5-month tops in the 0.8970/75 band.

EUR/GBP focused on UK politics

The rally in the European cross remains everything but abated so far today, up for the seventh week in a row and gaining nearly 6% since early May lows in the sub-0.8500 region.

The relentless sell off in the Sterling has been sustaining the up move in the cross to levels last seen in mid-January, always sustained by increasing uncertainty around UK politics, lack of any progress in the Brexit negotiations and deteriorating UK fundamentals.

No news regarding the race to Number 10, where former London mayor and Brexiteer Boris Johnson remains the clear frontrunner.

Later in the day, ECB’s M.Draghi will speak at the Sintra Forum ahead of final CPI figures in Euroland for the month of May and the release of the ZEW survey. In the UK docket, BoE’s M.Carney will also speak in Sintra ahead of the central bank’s meeting tomorrow.

What to look for around GBP

Heightened uncertainty around the Brexit negotiations and May’s successor keeps the pressure on the Sterling intact for the time being. In the UK economy, recent results from the labour market lent some oxygen to GBP, although the broader softness in fundamentals remain the name of the game. Additionally, the current steady stance from the Bank of England appears justified by below-target inflation figures, downbeat results from key economic fundamentals and somewhat slowing momentum in wage inflation pressures, all adding to speculations of a ‘no-hike’ this year despite some calls signalling a potential hike in November.

EUR/GBP key levels

The cross is gaining 0.16% at 0.8964 and a break above 0.8974 (monthly high Jun.17) would expose 0.9062 (low Jan.11) and finally 0.9092 (2019 high Jan.3). On the other hand, initial support lines up at 0.8871 (low Jun.12) followed by 0.8863 (21-day SMA) and then 0.8826 (low Jun.5).

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