EUR/GBP slumps to monthly lows below 0.89 on easing concerns over no-deal Brexit

After spending the majority of the day in a tight range near mid-0.89s, the EUR/GBP pair came under heavy bearish pressure in the early NA session and plummeted to its lowest level since early August at 0.8895 following the EU Chief Negotiator Barnier's comments on Brexit talks. After the initial reaction, the pair retraced a part of its losses and was last trading at 0.8916, where it was down 0.3% on the day. 

While speaking at an event in Slovenia, Barnier said that it would be realistic to expect that the EU would reach a Brexit deal with the UK in six to eight weeks. "We want a deal, we are on the way to find a deal," Barnier added. Boosted by these remarks, the pound sterling recorded sharp gains against its peers with the GBP/USD pair adding more than 100 pips in a very short time period.

In the meantime, earlier in the day, the report released by Sentix showed that investor confidence in the eurozone dropped to 12 in September from 14.7 in August and fell short of the market expectation of 14.6. On the other hand, despite the disappointing manufacturing & industrial production figures, the real-GBP growth on a monthly basis in July in the UK came in at 0.3% compared to analysts' estimate of 0.7%.

Moreover, the NIESR elaborated on the report: "The official data for July shows that retail sales responded strongly to recent warm weather and the football World Cup as did construction sector output which has recovered after a lacklustre performance at the start of 2018. Growth for the third quarter as a whole is likely to be driven by the service and construction sectors."  

Technical levels to consider

The initial support for the pair aligns at 0.8900/0.8895 (psychological level/daily low) ahead of 0.8850 (Aug. 2 low) and 0.8800 (Jul. 8 low). On the upside, resistances could be seen at 0.8955 (daily high), 0.9000 (psychological level) and 0.9050 (Sep. 5 high).