- EUR/GBP staged a modest bounce from multi-week lows amid some selling around the GBP.
- The lack of progress in Brexit negotiations undermined the sterling and remained supportive.
- Softer Eurozone PMIs kept the euro bulls on the defensive and might cap any strong move up.
The EUR/GBP cross rallied 35-40 pips in the last hour and spiked to fresh daily tops, around the 0.8980 region, albeit lacked any strong follow-through.
Having touched a five-week low near the 0.8945 region, the cross staged a modest intraday bounce amid the emergence of some selling around the British pound. As investors looked past Friday’s upbeat UK macro data, the sterling was weighed down by the lack of progress in Brexit negotiations.
In fact, the EU’s chief negotiator Michel Barnier said that Brexit talks did not move forward swiftly this week. Barnier further added that agreement is still possible, and is still our goal, though will not be easy to achieve. The deal needs to be ready by the end of October to leave time for ratification.
The negative Brexit-related headlines, to some extent, were offset by Friday’s mostly disappointing flash Eurozone PMI prints for August. The weaker data undermined the shared currency and kept a lid on any strong recovery for the EUR/GBP cross, at least for the time being.
From a technical perspective, the cross on Thursday confirmed a bearish breakthrough a two-month-old ascending trend-line. This, in turn, supports prospects for further weakness. Hence, any subsequent positive move might still be seen as a selling opportunity and fizzle out rather quickly.
Technical levels to watch
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