- EUR/GBP erases monthly gains and approaches 0.9100.
- The bid tone around GBP drags the cross lower.
- Hopes of a Brexit deal underpin the momentum in GBP.
The continuation of the buying pressure around the Sterling is now dragging EUR/GBP to fresh 2-week lows in the 0.9100 neighbourhood.
EUR/GBP weaker on EUR-selling, Brexit hopes
The downside pressure around the European cross has intensified in past hours and is now receding for the fifth consecutive session to the boundaries of the key support at 0.91 the figure, extending at the same time the rejection from 2019 tops in the 0.9320 area recorded on Monday.
In fact, the British Pound has quickly regained poise in response to rising hopes of a Brexit deal. According to latest news, more MPs appear to be backing a ‘no confidence’ vote sponsored by Labour leader J.Corbyn against PM B.Johnson. A favourable outcome of this motion could put Corbyn as interim PM, stop the UK to leave the EU without a deal and even open the door to a potential second referendum.
Also helping the upside momentum in the British Pound, this week’s UK calendar surprised to the upside following the releases of the labour market, inflation figures and retail sales.
What to look for around GBP
The outlook on the British Pound has improved considerably in the last couple of sessions, always helped by unexpected hopes of a Brexit deal, which at the same time ‘needs’ Labour leader J.Corbyn to step up as interim PM after a successful ‘no confidence’ vote against PM B.Johnson. Aside from this political issue, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of the continuation of preparations for the ‘hard-divorce’ case. Back to the UK economy, this week’s releases brought in some respite to the Sterling following latest poor advanced Q2 GDP figures. At its last meeting, the BoE kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
EUR/GBP key levels
The cross is retreating 0.87% at 0.9107 and a drop below 0.9088 (low Jul.31would expose 0.9010 (55-day SMA) and then 0.8891 (monthly low Jul.25). On the flip side, the next up barrier is located at 0.9324 (2019 high Aug.12) followed by 0.9411 (monthly high Oct. 2009) and finally 0.9804 (all-time high December 2008).
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