EUR/GBP retakes the 0.8900 handle and above

EUR/GBP resumes the upside and regains 0.8900.
BoE left unchanged the repo rate at Wednesday’s meeting.
Boris Johnson and Jeremy Hunt will race to be the next PM.

Pablo Piovano FXStreet

The softer tone in the Sterling in combination with the continuation of the buying bias in the shared currency has motivated EUR/GBP to regain the key 0.8900 the figure and beyond.

EUR/GBP looks to UK politics

The European cross is so far reversing two consecutive daily pullbacks after some selling pressure resurfaced in the British Pound.

In fact, GBP remains well under pressure after the BoE left unchanged its monetary policy at its meeting on Thursday, noting that uncertainty around any Brexit outcome represents the main headwind for the currency in the medium to longer run.

In addition, the likelihood of a ‘no deal’ scenario in the Brexit negotiations looks increasingly likely, particularly after yesterday’s MPs ballot voted out Michael Gove as a candidate to the race for Number 10, which was narrowed down to Boris Johnson and Jeremy Hunt. Consensus among investors and the financial community sees former London mayor and known-Brexiteer Boris Johnson to be the next Prime Minister.

In today’s docket, Public Sector Net Borrowing shrunk to £4.46 billion during May from April’s £6.15 billion and £3.3 billion forecasted. Next in the UK calendar will be the speech by BoE’s Tenreyro in Copenhagen.

Closer to home, advanced PMIs in core Euroland surprised to the upside in general for the month of June, collaborating with the firm note in EUR.

What to look for around GBP

Rising uncertainty in the UK political scenario is expected to keep the cautious tone in the British Pound, while USD-dynamics emerged as the exclusive driver for the recent up move in Cable, although its sustainability remains to be seen. In the UK economy, mixed-to-poor results from fundamentals continue to add to the sour prospects for the economy in the months to come. On another direction, the overall tone from the BoE appears to have shifted towards a more neutral (dovish?) gear, while uncertainty around Brexit is seen as the main obstacle in determining the next move on rates.

EUR/GBP key levels

The cross is advancing 0.35% at 0.8920 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, the next support is located at 0.8872 (low Jun.20) followed by 0.8826 (low Jun.5) and then 0.8778 (200-day SMA).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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