- EUR/GBP remains pressured around early April low, prints three-day downtrend.
- UK’s unlock optimism, request for three-month to overcome NI sausage issue favor sterling.
- EUR struggles to cheer a pause in DXY rally amid a lack of major data/events.
- UK Retail Sales for May expected to ease, may probe sellers.
EUR/GBP remains on the back foot, despite the recent bounce off intraday low, during the third daily downside amid Friday’s Asian session. In doing so, the quote seems to take clues from the market’s consolidation while testing bears cheering the upbeat catalysts from the UK.
Despite a jump in the UK’s hospitalization, the levels are below January’s record peak and favor the odds of a two-week early unlock of Britain, as proposed by PM Boris Johnson. In this regard, the UK’s Daily Mail mentioned anonymous sources to say, “Lockdown could end two weeks early if Covid data continues to improve.”
Elsewhere, the UK’s formal request of a three-month time to solve the sausage battle with the European Union (EU) in Northern Ireland (NI) also backs the EUR/GBP bears. The Guardian cites Britain’s readiness to guarantee the EU citizen voting right in local elections as the driver behind the request. The news said, “The Brexit minister, Lord Frost, has written to the EU with an official request to extend the grace period to 30 September for the sale of sausages produced in Great Britain in Northern Ireland supermarkets.”
It’s worth noting that the pair dropped to the lowest since early April the previous day amid the market’s shift from the Euro to the US dollar due to the US Federal Reserve’s (Fed) rate hike signals. However, the following pause in the US dollar index (DXY) rally from April 13 top triggers the corrective pullback of the regional currency, as well as the EUR/GBP pair.
Amid these plays, US Treasury yields seesaw around 1.51% while the stock futures are mildly bid.
Looking forward, the UK’s Retail Sales for May, expected to ease from 42.4% YoY to 29%, will be the key as the strong print of the UK’s Consumer Price Index (CPI) data has already strengthened the odds of the Bank of England’s (BOE) tapering.
Technical analysis
A gradual downward trajectory below 100-day SMA, around 0.8635, directs EUR/GBP to a two-month-old descending support line near 0.8515.
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