EUR/GBP upside remains capped by 0.9100, eyes on Brexit

The offered mood around the British Pound is helping EUR/GBP to regain some extra traction and approach the key barrier at the 0.9100 mark on Monday.

EUR/GBP focused on Brexit woes

Following last week’s rally, the Sterling saw the upside momentum trimmed at the beginning of the week in tandem with shrinking optimism on the likelihood of a Brexit deal.

In fact, the Irish backstop remains a crucial issue for the resumption of talks between London and Brussels. However, it stays unresolved and a solution appears farther away with the day.

Latest news cited UK PM B.Johnson saying the chances of a Brexit deal are a ‘touch and go’, while at an interview at the G7 event in France he said the country must be ready for a ‘no deal’ outcome.

In today’s docket, the single currency is suffering the poor prints from the German IFO indicator and continues to shed ground after Friday’s positive performance.

What to look for around GBP

The Sterling reacted (very) positively to Merkel’s hope of a solution to the Irish backstop before the end of October, although such an outcome hinges utterly on the UK… and not on hopes of any EU official. It is worth recalling that PM Johnson deems the backstop as ‘anti-democratic’ and he has repeated many times that it needs to be removed from the Withdrawal Deal to allow for the continuation of the negotiations between both parties. 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 gaining 0.21% at 0.9080 and faces the next up barrier at 0.9166 (21-day SMA) followed by 0.9183 (high Aug.20) and finally 0.9324 (2019 high Aug.12). On the flip side, a drop below 0.9028 (low Aug.22) would expose 0.8891 (monthly low Jul.25) and then 0.8886 (100-day SMA).