EUR/GBP tumbles to lows near 0.8630, risk-on mood prevails

The persistent selling bias around the greenback is lending extra support to both the Sterling and the shared currency and forcing EUR/GBP to drop to daily lows in the 0.8630/20 band.

EUR/GBP upside capped near 0.8650

The European cross is reversing Monday’s positive performance and has resumed the recent downside, finding quite decent support in the 0.8620 zone for the time being, where coincide the 21-day and 55-day SMAs.

The increasing downside pressure around the greenback is lending support to the demand for the riskier assets and is also motivating the cross to extend the recent sideline theme in the low-0.8600s.

Data wise in Euroland, flash Q1 GDP figures showed the euro area is expected to expand at an annualized 1.2% and 0.4% QoQ, while the jobless rate ticked lower to 7.7% in March. Across the Channel, the BoE event is due on Thursday ahead of Friday’s Services PMI.

Back to Brexit negotiations, cross-party talks are expected to resume later this week following the positive tone from the last meetings; while speculations are mounting over a potential ‘no-confident’ vote on PM Theresa May put forward by Conservative Dinah Glover.

What to look for around GBP

Market participants have now shifted their focus to the upcoming local elections in the UK and ongoing cross-party talks. In the meantime, the absence of fresh significant Brexit headlines appears to reinforce the cautious stance around the Sterling. Recent positive data from the industrial sector and PMI were exclusively driven by companies stockpiling in case of a ‘hard Brexit’ outcome, morphing into a temporary relief for GBP although failing to allay concerns over the outlook on the UK economy and the currency in the longer run. In addition, the current steady stance from the Bank of England appears justified by below-target inflation figures, mixed results from key economic fundamentals and somewhat slowing momentum in wage inflation pressures, all adding to already rising speculations of a ‘no-hike’ this year.

EUR/GBP key levels

The cross is losing 0.17% at 0.8631 and faces the next support at 0.8620 (low Apr.29) seconded by 0.8502 (low Apr.3) and finally 0.8483 (low Mar.27). On the upside, a break above 0.8681 (high Apr.23) would expose 0.8722 (high Mar.21) and then 0.8737 (100-day SMA).