EUR/GBP: offered but any deeper dips to hold down at 0.8818

EUR/GBP had continued to with its crusade towards the top of the ascending channel, rallying from 0.8880 yesterday and onto 0.8937 into the London fix before sliding back in NY to 0.8914 the low so far. The pound has been strong in European trade on soft Brexit noise with the FT article that reported Barnier warming to PM May's Brexit plan after the clarification over the City - and this effectively hands the EU a veto over UK regulatory reform.

This affirmation for the EU by British negotiations that the EU would be able to withdraw the market access for British firms if the UK’s rules were no longer equivalent to EU standards cleared up the previous misinterpretations by Brussels’ negotiator as to what the Prime Minister’s White Paper was asking for financial services in the post-Brexit relationship between the UK-EU giving rise to a softer Brexit outlook which is regarded as a positive for the pound. 

EZ data mixed, GDP miss smothers upside from EZ inflation data

However, there was a temporary turnaround on the EZ inflation data, (EZ HICP inflation 2.1 vs 2.0%) which sent the cross back to being a few pips away from the previous high for a moment, until the GDP miss that was released at the same time was digested by markets. The EZ GDP missed by 0.1% and the cross has been in decline again since. As analysts at ING Bank explained, "the core rate picked up to 1.1%, which is where it was in May as well. This is still weak and very much in line with ECB expectations. As the energy effects are temporary, the high inflation rate should be taken with a grain of salt from a policy perspective at the moment, so will the ECB."

EUR/GBP levels

Analysts at Commerzbank explained EUR/GBP last week failed just ahead of the 0.8967 March high and the 0.8964 50% retracement:

"We have already seen a small pullback, which has so far held over the 2 month uptrend at 0.8877. Dips back will find additional support at the 200 day ma at 0.8818 and the 55 day ma at 0.8814. Above 0.8967 will target the 0.9034 October 2017 high."