- EUR/GBP’s rally is stablising following yesterday’s rally on the back of negative prospects for the outcome of Brexit negotiations.
- EUR/GBP is currently trading at 0.8744, trading in a narrow range of between 0.8759 and 0.8714.
EUR/GBP is a complex pair at the moment from a fundamental stapoint. One on hand economic sentiment for the EZ region is negative. “The economic sentiment indicator of the European Commission fell further in January. While forward-looking indicators don’t point to much improvement in Q1, consumers are offering a glimmer of hope,” analysts at ING Bank explained, adding,
“At this point, we think the risk of a recession this year still remains low, unless all downward risks materialise. That said, the best now lies behind us, and Eurozone growth should come out between 1.0% and 1.5% in 2019, nothing to cheer about. We, therefore, think ECB policy will have to remain very supportive and we expect the ECB to decide on a new (T)LTRO for the banks by June, to keep easy credit conditions in place.”
Brexit dents progress in sterling
Meanwhile, Brexit is playing havoc on the screens, making for a very volatile backdrop in sterling. The House of Commons passed two amendments yesterday. First of which was a non-binding statement that a no-deal outcome is unacceptable.
Then, we had the so-called Brady amendment that seeks “alternative arrangements to avoid a hard border”. As a result, the markets are pricing for a situation whereby the UK is moving closer to a managed no-deal exit.
EUR/GBP levels
Analysts at Commerzbank noted that EUR/GBP has sold off and is seeing a small recovery from the 0.8620 2018 low which is holding on a closing basis. “We would allow for a possible rally back into the .8775/.8840 band ahead of failing. Failure at .8620 would suggest ongoing weakness to the base of the channel at .8547 and potentially the 200-week ma at .8341. The market stays directly offered below the 200-day ma at .8864, and only above here allows for a move to the 55 day ma at .8905 and this, together with the October .8941 high, are expected to contain the topside.”
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