- The cross is looking to consolidate in the mid-0.8700s.
- UK labour market report came in mixed today.
- PM T.May expected to hold a cabinet meeting later.
The Sterling trades on a sideline theme so far today and is now prompting EUR/GBP to navigate without a clear direction in the mid-0.8700s, the lower bound of the weekly range.
EUR/GBP focused on Brexit developments
The European cross remains under pressure this week following the renewed buying interest around the British Pound despite mixed results from the UK docket.
It is worth recalling that the jobless rate in the UK stayed put at 4.0% during the last month of 2018, while Claimant Count Change dropped to 14.2K in January (vs.12.3K forecasted) and the Average Earnings Index gained 3.4% YoY in December.
On this side of the Channel, Economic Sentiment in both Germany and Euroland improved a tad according to the latest ZEW Survey.
Moving forward and back to Brexit, PM Theresa May will meet her cabinet later today following yesterday’s resignation of seven MPs from the Labour party. May is also expected to meet EU J.C.Juncker in Brussels tomorrow evening.
What to look for around GBP
The Sterling is expected to remain under increasing pressure as the clock continues to tick and there is no progress on the horizon (or even any hint of it) in the UK-EU divorce negotiations. So far, consensus among market participants points to a most likely extension of Article 50 in the next weeks or a deal on the 11th hour. However, the Irish backstop issue stays unsolved and a ‘hard’ scenario remains on the table ahead of the crucial vote on February 27. This, in combination with soft inflation figures as of late and prospects of extra deterioration in UK fundamentals should be enough to keep occasional rallies in GBP well capped.
EUR/GBP key levels
The cross is losing 0.10% at 0.8741 and a breach of 0.8728 (low Feb.7) would expose 0.8655 (low Nov.13 2018) and then 0.8616 (2019 low Jan.25). On the other hand, the next up barrier aligns at 0.8766 (10-day SMA) followed by 0.8840 (high Feb.14) and finally 0.8860 (200-day SMA).
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