EUR/GBP on the defensive around 0.9200

EUR/GBP resumes the downside and tests the 0.9200 level.
Euro, sterling trade on a firm note on USD-weakness.
UK flash Services PMI collapsed to 35.7 in March.

The increasing buying interest around the British pound is forcing EUR/GBP to recede to the 0.9200 region on Tuesday.

EUR/GBP offered, ignores data

EUR/GBP has resumed the downside on Tuesday and is partially fading the moderate advance recorded at the beginning of the week.

Developments around the coronavirus continue to drive the sentiment in the global markets as well as the response from affected countries, mainly in the form of imposing/extending quarantine periods by governments and via looser monetary conditions from central banks.

In the docket, Markit’s advanced Manufacturing PMI in both Germany and the euro area surprised to the upside for the current month, although they both slipped back into the contraction territory, as largely anticipated. On the other side of the Channel, the preliminary Services PMI plummeted to 35.7. The effects on the FX space was muted, however, as investors already anticipated such an outcome on the back of the impact of the COVID-19 on growth prospects.

What to look for around GBP

The British pound keeps correcting higher so far this week, bouncing off levels last seen in times of the Plaza Accord in 1985 vs. the greenback and multi-month lows vs. the euro. The extra stimulus from the Fed is lending oxygen to both currencies at the moment, although they’re not out of the woods yet. In addition, GBP is expected to remain under the microscope in light of the upcoming EU-UK trade negotiations to kick in later this year, while shaky UK fundamentals plus the impact of the coronavirus on the domestic and global economy open the door to the palpable possibility that the country could slip into recession in the near future.

EUR/GBP key levels

The cross is losing 0.85% at 0.9206 and a drop below 0.8994 (low Mar.20) would expose 0.8861 (21-day SMA) and finally 0.8753 (200-day SMA). On the other hand, the next resistance lines up at 0.9499 (2020 high Mar.19) seconded by 0.9649 (monthly high January 2009) and then 0.9804 (monthly high December 2008).

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