EUR/GBP drops to multi-day lows in sub-0.8900 levels

• EUR/GBP comes under downside pressure and tests 0.89.
• UK’s CBI Distributive Trades Survey came in better than expected.
• BoE’s Haldane said the economy probably contracted around 20% in Q2.

The persistent weakness around the greenback is giving extra wings to the sterling and the euro, putting EUR/GBP under extra pressure in the 0.8900 neighbourhood.

EUR/GBP tumbles to multi-day lows

EUR/GBP is losing further momentum so far this week and is now putting the 0.89 mark under extra pressure on the back of some improved sentiment surrounding the sterling and the shared currency, albeit at a lesser degree.

Data wise on Tuesday, the UK’s CBI Distributive Trades Survey came in at -50 for the current month, a tad above estimates. On this side of the Channel, earlier results saw the GfK’s Consumer Climate “improving” to -18.9 for the month of June.

The British pound also derived some extra buying interest after the UK-EU trade negotiation showed some little signs of progress at the latest talks, mainly regarding fisheries and all ahead of the June 30 deadline (for en extension of the transition period beyond December 31^st 2020).

Earlier in the session, the BoE’s A.Haldane hinted at the probability that the economy could contract around 20% in the April-June period, while he stressed that there is still no decision among his peers regarding negative interest rates and that the labour market could return to pre-coronavirus levels by 2023.

Moving forward, the ECB’s P.Lane is also expected to speak.

What to look for around GBP

The British Pound is the worst performing G10 currency so far this month. Indeed, the quid appears to have met quite a significant barrier above the 1.2600 mark vs. the greenback (200-day SMA) and the 0.8660 area vs. the euro (April lows). Moving forward, the sterling is expected to remain under pressure against the backdrop of rising criticism over the mishandling of the coronavirus crisis by the UK government and the potential re-opening of the economy, all amidst the forecasted deep recession the country is expected to face in the first half of the year. Further weakness also stems from the probability that the UK would not ask for an extension of the transition period, opening the door to hard UK-EU trade negotiations. In addition, the sterling risks extra retracements as the BoE continues to assess the potential implementation of negative interest rates.

EUR/GBP key level

The cross is losing 0.46% at 0.8898 and a breach of 0.8871 (55-day SMA) would expose 0.8703 (200-day SMA) and then 0.8670 (monthly low Apr.30). On the other hand, the initial hurdle aligns at 0.9000 (monthly high May 21) followed by 0.9019 (monthly high Oct.20 2019) and finally 0.9324 (2019 high Aug.12).