EUR/GBP pierces 0.8500, prints three-day uptrend as Brexit, covid weigh on sterling
- EUR/GBP stays on the front foot near one-week high.
- Chatters over ECB’s tapering, Lagarde’s absence from Jackson hole and USD weakness favor the bloc’s currency.
- Fears of Brexit failures and worsening virus conditions in the UK challenge the GBP despite recently upbeat economics.
- Risk catalysts are important for immediate direction amid a light calendar.
EUR/GBP edges higher around 0.8510, up 0.10% during a three-day rise amid early Monday. The cross-currency pair benefits from the British pound’s (GBP), also known as Sterling, broad weakness to keep the buyers hopeful amid risk-off markets. Additionally favoring the quote could be the Euro-zone currency’s (EUR) counter-strength due to the US dollar’s weakness.
Although the UK’s latest virus numbers are a bit promising and the government is up for 16-17-year-old in England by 23 August, per Sky News, the weekly infections and death tolls remain near early 2021 highs in Britain. The bloc, on the other hand, seems to have suffered a bit lesser of late as easing in the covid figure from Spain, Italy and France supersede a bit higher infections in Germany.
It should be noted that the Brexit woes are likely to extend per Director of UK in a Changing Europe, Professor Anand Menon, quoted by the UK Express. “Hostility from both sides was expected to continue for two key reasons. One reason is being the issues surrounding Northern Ireland and another being the EU's determination to see Brexit fail,” said the news.
It’s worth mentioning that the chatters surrounding the ECB’s QE tapering and President Christine Lagarde’s likely absence from the key Jackson Hole Symposium probe the EUR/GBP bulls of late. As per the latest Reuters poll, “ECB saw laying out plans in Q4 to end emergency asset purchases.”
Against this backdrop, US 10-year Treasury yields remain weak for one more day amid fresh economic fears from the US. The risk-off mood could also be witnessed via S&P 500 Futures, down 0.30% by the press time.
Given the lack of major data/events, EUR/GBP traders may keep their eyes on the qualitative factors mentioned above for fresh impulse.
Technical analysis
Sustained break of a month-old rising wedge bullish formation, initiated on Thursday, keeps EUR/GBP buyers hopeful to cross the 21-DMA hurdle surrounding 0.8530. However, the monthly high surrounding 0.8560 may challenge the bulls afterward.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
