- Upbeat labour market data from UK helps GBP gather strength.
- Economic sentiment continues to deteriorate in the euro area.
- Brexit uncertainty could help the pair limit its losses.
Following the decisive recovery it staged in the second half of the previous week, the EUR/GBP pair started the week under pressure and extended its slide on Tuesday to its lowest level since November 15 at 0.8760. As of writing, the pair was down 0.59% on the day at 0.8765.
Earlier today, the data published by the UK’s Office for National Statistics showed that the unemployment rate ticked down to 4% in November to better the market expectation of 4.1%. Further details of the report revealed that the average earnings including bonuses and excluding bonuses increased by 3.4% and 3.3%, respectively, to allow the British pound to outperform its major rivals.
On the other hand, the ZEW reported that the economic sentiment continued to deteriorate in the euro area in December. Although the same data for Germany showed a modest improvement, the fact that the Current Situation Index plummeted to 27.6 from 45.3 in December didn’t allow the shared currency to react positively to the data.
Despite today’s price action, however, the pair’s losses could remain limited in the near-term as investors are unlikely to make large bets while waiting for fresh Brexit headlines. While speaking to reporters on Tuesday, Brexit Secretary Barclay argued that going back to a second referendum would damage the democracy and reiterated that it will be in both sides’ interest to reach an agreement.
Key technical levels
The immediate support for the pair aligns at 0.8740 (Nov. 4, 2018, low) ahead of 0.8690 (Nov. 9, 2018, low) and 0.8655 (Nov. 13, 2018, low). On the upside, resistances could be seen at 0.8825 (daily high), 0.8860 (Jan. 21 high) and 0.8920 (20-DMA).
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