- The pound remains strong on the back of the latest polls and risk sentiment.
- Euro under pressure with EUR/USD back near 1.1000.
The EUR/GBP dropped further below 0.8550 and reached a fresh one-week low at 0.8530, slightly above the November low at 0.8520. A break below would put the pair at its weakens level since May.
A stronger pound across the board is the key driver today. While GBP/USD trades on top of 1.2900 at daily highs, EUR/USD is consolidating losses, unable to rebound from 1.1000.
Politics driving the pound higher… for now
The improvement in market sentiment and the latest polls ahead of the general election in the United Kingdom offered support to the pound at the beginning of the week. It is higher across the board, erasing Friday’s losses.
Over the weekend, polls show the Conservative Party leading with around 40/44% of the vote intention, while the Labour Party around 30%. Expectations of an important victory for the conservatives would be seen as a probable end to the Brexit drama. In the manifest, UK Prime Minister Johnson’s party mentioned they would look for a deal back to the Parliament before Christmas. On the contrary, the euro remained weak following November’s IFO survey. The index bounced but market consensus pointed to a higher number.
From a technical perspective, EUR/GBP holds a bearish tone. A break below 0.8520w would expose 0.8500 and then attention would turn to 0.8470. On the upside, a daily close on top of 0.8595/0.8600 (horizontal resistance and 20-day moving average) would remove the bearish bias signaling further gains ahead.
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