- Contradicting information regarding customs unions make the pound ease against the euro in the European session.
- The euro is holding rather well despite anti-establishment parties in Italy.
The EUR/GBP is trading at around 0.8739 down 0.16% on Thursday as Theresa May denies the customs unions climbdown.
In Asia, the currency cross dropped about 38 pips from the 0.8750 level. It then found an intraday floor at 0.8712 then in Europe EUR/GBP bounced back up to restest the 0.8750 level. It is now consolidating n the 0.8735 area.
Overnight, the Telegraph reported that Britain was ready to stay in the EU customs union beyond 2021 and that Theresa May UK Prime Minister had approved a ‘backstop’ plan. The British pound gained 38 pips against the euro on the news in Asia. However, in the European session contradicting information regarding the customs union started pouring in and EUR/GBP erased the previous gained made in Asia. In fact, while the House of Lords say that the customs union is essential for UK businesses, the UK government’s official position remains unchanged as it plans to leave the customs union after the Brexit.
“No, we are not climbing down. The United Kingdom will be leaving the customs union, and we are leaving the European Union. Of course, we will be negotiating future customs arrangements with the European Union and I have set three objectives; the government has three objectives in those. We need to be able to have our own independent trade policy, we want as frictionless a border as possible between the UK and the EU so that trade can continue and we want to ensure there is no hard border between Northern Ireland and Ireland,” said Theresa May on Thursday morning leaving markets confused.
On the other hand, in Italy, it has been reported that the Five-Star Movement and League have reached a final agreement on the government program and that they are now busy deciding who will become the Prime Minister. Although the two leading parties are somewhat anti-establishment the survival of the euro is not likely at stake. “It is very doubtful that the Italians would want to leave the euro. The topic did not feature in the election campaign, so euro-skepticism was not the prime reason people voted for the Five-Star Movement and League. Even if the Italians are among the most euro-skeptic countries, a clear majority still supports the single currency,” according to analysts at Nordea Market.
Later in the day will see the speech of Andrew G. Haldane, chief economist at the Bank of England and member of the Monetary Policy Committee. He will be speaking at the Economic Statistics Centre of Excellence Conference on Economic Measurement in the UK at 16:00 GMT.
EUR/GBP 4-hour chart
The trend is neutral to slightly bearish. Support is seen at 0.8712 low of the day in Asia followed by 0.8727 swing low established on May 9, followed by the 0.8680 swing low of April 26 and finally the cyclical low at 0.8620 made on April 17. To the upside, bulls should expect resistance at the 0.8750 previous swing high in Europe and at 0.8780 level previous swing high and home of the 100-period simple moving average on the 4-hour time-frame. The next scaling point to the upside is likely the 0.8844 swing high made on May 4.
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