EUR/GBP steadily recovers toward 0.88 after UK PM May wins key Brexit vote

The UK Government wins the 'meaningful vote' on Brexit on Wednesday.
Remarks from ECB members fail to revive the shared currency.

Eren Sengezer FXStreet

The EUR/GBP pair dropped to its lowest level of the day at 0.8767 in the first half of the NA session but started retracing its losses on the back of political developments from the UK. As of writing, the pair was trading at 0.8790, down only 6 pips on the day.

During the discussion at the UK Parliament today, anti-Brexit rebel leader Grieve said that he was prepared to accept the government's difficulty and support it and the UK government successfully defeated the amendment proposed by the pro-EU conservative lawmakers to win the Brexit 'meaningful vote' with a majority of 16 votes. The GBP, which has been having a hard time finding interest amid the uncertainty, staged a modest relief rally and gathered strength against its rivals.

Earlier today, European Central Bank (ECB) governing council member Ewald Nowotny argued that the risk for financial stability in the euro area Europe was more political than economical and added that he was expecting the euro to depreciate further against the USD. On the other hand, speaking at the ECB's forum, Mario Draghi, President of the European Central Bank, didn't deliver any surprising comments on the monetary policy outlook.

On Thursday, the BoE is going to announce its interest rate decision and publish the monetary policy statement. There won't be a press conference.

"An on-hold MPC should leave GBP without a strong directional push as global forces dominate. A hawkish dissent may see some modest downside in EURGBP after the ECB. Dovish risks may be best expressed in cable amid a broadly stronger USD and ongoing Brexit concerns,” TD Securities analysts wrote in a recently published report.

Technical levels to consider

The pair could face the immediate support at 0.8765 (daily low) ahead of 0.8715 (Jun. 14 low) and 0.8645 (Apr. 12 low). On the upside, resistances align at 0.8800 (psychological level), 0.8840 (Jun. 7 high/May 4 high) and 0.8870 (Feb. 19 high).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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