EUR/GBP upside capped by the 200-hour SMA near 0.9080

The soft note prevails around the shared currency at the end of the week, prompting EUR/GBP to fade part of the recent advance and return to the 0.9080 area.

EUR/GBP focused on Brexit, UK politics

The Sterling has been losing some upside momentum since recent tops vs. both the Greenback and the shared currency, as the optimism over a potential resumption of EU-UK talks and even the possibility of a solution to the Irish backstop has diminished somewhat.

Latest news keeps pointing to increasing opposition from MPs to PM B.Johnson’s plans after he suspended the Parliament earlier this week. In addition, it is now expected negotiators from both parties to meet on a weekly basis ahead of a key summit on October 17.

In the UK docket, M4 Money Supply expanded at a monthly 0.7% during July, Mortgage Approvals rose by 67.31K also during last month and Net Lending to Individuals expanded £5.5 billion during the same period, all prints coming in above estimates.

Closer to home, EMU flash inflation figures gauged by the CPI showed prices are expected to rise 1.0% on a year to August while Core prices are seen up 0.9% from a year earlier. In Germany, Retail Sales contracted 2.1% in July from a month earlier.

What to look for around GBP

The recent move by PM Boris Johnson has opened the door to extra uncertainty in UK politics and it appears to support further the chances of a ‘hard Brexit’ outcome on October 31. However, opposition to a ‘no-deal’ outcome remains firm and volatility is forecasted to increase around the Pound as EU-UK negotiations are expected to intensify in the next days. On another direction, the BoE kept the monetary conditions unchanged at its last meeting, although it refuses to factor in a ‘no deal’ scenario in its projections for the time being. 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 losing 0.09% at 0.9068 and a drop below 0.9016 (low Aug.27) would expose 0.8891 (monthly low Jul.25) and then 0.8835 (200-day SMA). On the flip side, the next up barrier emerges at 0.9152 (21-day SMA) followed by 0.9183 (high Aug.20) and finally 0.9324 (2019 high Aug.12).