EUR/GBP surges to 22-week high as UK’s political uncertainty weighs on the Pound

  • UK’s Finance Minister stays ready to resign after amid disagreement over the Prime Minster May's spending plans.
  • Tension ahead of the second round of Tory voting also weighs on the Pound.

With the British Finance Minister’s warning to resign crossing the wires, the EUR/GBP pair surges to the fresh high since mid-January before taking the rounds to 0.8970 during early Tuesday.

The UK Finance Minister Phillip Hammond announced his disagreement over the Prime Minister Theresa May’s spending plan with a warning to resign.

Uncertainty surrounding the UK PM’s race has been weighing on the British Pound (GBP) off-late. The lead runner, Boris Johnson, refrained from attending a debate with rest five candidates while some of the soft Brexit supporters gained more applause during the talks.

On the other hand, the Euro (EUR) gained after the European Central Bank’s (ECB) Governing Council member Benoit Coeure turned down fears of recession with upbeat comments during an interview with Financial Times.

While the second round of Tory voting for the rest 6 candidates may grab market attention, speeches from the ECB President Mario Draghi and Bank of England (BOE) Governor Mark Carney will also become important to observe.

The European and UK central bank leaders are scheduled to speak at the ECB’s forum on central banking in Sintra.

Technical Analysis

Mid-January high of 0.8990 holds the key to 0.9060/70 resistance-area, comprising multiple tops marked between late-December 2018 and early 2019, a break of which could further escalate the north-run towards current year’s high near 0.9120. However, overbought levels of 14-day relative strength index (RSI) indicate brighter chances of the pair’s pullback to 0.8950 immediate support ahead of highlighting 0.8900 and 21-day simple moving average (SMA) level of 0.8870.

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