- EUR/GBP trades on a volatile fashion around the 0.8900 handle.
- UK Services PMI slipped into contraction at 49.5 in September.
- PM B.Johnson expected to address MPs on his Brexit plans.
Up and downs around the Sterling and the single currency on Thursday leave EUR/GBP just above the 0.8900 handle and posting small gains for the day so far.
EUR/GBP focused on Brexit, ignores PMI
The European cross is looking to extend the weekly recovery for the third consecutive session in the second half of the week backed on the ongoing recovery in EUR while GBP keeps swinging around Brexit headlines.
Speaking about Brexit, PM B.Johnson will address MPs on his Brexit proposals in the Parliament later today. It is worth recalling that Johnson put forward a plan on Wednesday where Northern Ireland would leave the customs union but remain within the European single market for goods.
Further out, UK PM reiterated once again that the country will leave the EU on the original deadline on October 31st, with or without a deal.
On the EU side of the negotiating table, Johnson’s plans were cautiously welcomed, although further details remain absent.
Data wise today, the always-relevant UK services PMI came in at 49.5 for the month of September, missing expectations and falling into the contraction territory once again. The last time the index was below the 50 threshold was in March. In Euroland, Producer Prices contracted 0.5% inter-month in September and 0.8% over the last twelve months; Retail Sales rebounded in August, up 0.3% MoM and 2.1% YoY.
What to look for around GBP
Investors will be closely following the progress (or lack of it) of the UK PM B.Johnson’s proposal for the Irish backstop, to be addressed later today in Parliament. While a EU response has been cautious, a final worth is expected any time soon. Away from politics and back to the BoE, the recent comments from (former hawk) M.Sunders regarding the likelihood of a rate cut if the UK economic outlook worsens are expected to keep rallies in GBP somewhat limited for the time being. His comments carry the potential to spark a division in the central bank’s ranks, as the ‘Old Lady’ remains reluctant to factor in a probable ‘hard Brexit’ into its projections for the time being.
EUR/GBP key levels
The cross is losing 0.02% at 0.8904 and a drop below 0.8830 (200-day SMA) would expose 0.8785 (monthly low Sep.20) and then 0.8667 (78.6% Fibo of the May-August rally). On the other hand, the next resistance emerges at 0.8936 (monthly high Oct.1) seconded by 0.8970 (100-day SMA) and then 0.9004 (38.2% Fibo of the May-August rally).
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