- EUR/GBP posts decent gains near the 0.90 handle.
- New UK PM will be announced later today.
- ‘No deal’ Brexit remains on the cards and weigh on GBP.
Both the Sterling and the single currency remain under pressure so far this week and are now allowing EUR/GBP to regain the vicinity of the 0.9000 mark.
EUR/GBP looks to UK politics
The European cross has managed to bounce off daily lows in the 0.8980 region and is now orbiting around the key 0.9000 mark amidst increasing nervousness ahead of the Conservative vote expected around midday.
In fact, around 160,000 Tory members will vote to reveal the next party leader and the successor of Theresa May at Number 10. It is worth recalling that both candidates Boris Johnson and Jeremy Hunt have not ruled out the option that the UK could leave the EU without a deal.
On this side of the Channel and later in the week, the shared currency should remain under the microscope in light of the ECB event and the probability that the central bank could announce another wave of monetary stimulus. Further out, markets’ attention is also expected to be on the publication of advanced PMIs and the German IFO.
In the UK docket, CBI Industrial Trends Orders for the month of July are due later.
What to look for around GBP
UK politics continue to dictate the sentiment around the British Pound for the time being, while all the looks will be upon the announcement of the new PM later today. On the Brexit side, GBP is expected to stay under pressure as the ‘no deal’ option remains well on the table. Back to the UK economy, poor results from key fundamentals continue to add to the sour prospects for the economy in the months to come and collaborate further with the bearish view on the currency. On another direction, the overall tone from the BoE appears to have shifted towards a more dovish gear, while markets have started to price in the likeliness of a rate cut at some point in Q3/Q4.
EUR/GBP key levels
The cross is advancing 0.01% at 0.8984 and faces the next hurdle at 0.9051 (monthly high Jul.17) seconded by 0.9062 (high Jan.11) and finally 0.9092 (2019 high Jan.3). On the downside, a breach of 0.8954 (low Jul.22) would open the door to 0.8919 (low Jul.2) and then 0.8872 (low Jun.20).
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