- EUR/GBP recovers some ground and advances to 0.9170.
- GBP loses some shine on UK politics.
- Rumours of snap elections keep gathering pace.
The increasing selling bias around the Sterling is sponsoring the current recovery in EUR/GBP to the 0.9160 region.
EUR/GBP bottomed out just below 0.9100
The European cross has managed to find dip-buyers in sub-0.9100 levels on Friday, area coincident with the expected initial support (July 31 low).
The British Pound remains under pressure on the back of renewed UK political jitters, this time brought in by the insistence of Labour leader J.Corbyn on a ‘no confidence’ vote against PM B.Johnson and the subsequent call for anticipated elections. Corbyn sees this steps as necessary to avoid a ‘hard Brexit’ outcome on October 31.
In the meantime, Corbyn is expected to meet several political leaders later this week in order to garner support for his plans to become an interim PM in the near future (?).
What to look for around GBP
A slap of reality is forcing the Sterling to give away part of the recent advance and re-focus instead on the increasing uncertainty in the UK political arena, where Labour leader J.Corbyn and his plans to be an interim PM remain in centre stage. Aside from this political issue, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of the continuation of preparations for the ‘hard-divorce’ case. Back to the UK economy, this week’s releases brought in some respite to the Sterling following latest poor advanced Q2 GDP figures. At its last meeting, the BoE kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
EUR/GBP key levels
The cross is gaining 0.44% at 0.9166 and faces the next hurdle at 0.9220 (10-day SMA) followed by 0.9324 (2019 high Aug.12) and then 0.9411 (monthly high Oct. 2009). On the flip side, a drop below 0.9088 (low Jul.31would expose 0.9016 (55-day SMA) and then 0.8891 (monthly low Jul.25).
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