- EUR/GBP reverses Wednesday’s pullback and reaches the 0.9070 area.
- EU Summit on Thursday-Friday will focus on the Brexit talks.
- Stronger dollar weighs on the risk complex on Thursday.
The resumption of the selling bias in the quid is helping EUR/GBP regain some buying interest and climb to as high as the 0.9070/75 band in the second half of the week.
EUR/GBP looks to the EU Summit
EUR/GBP extends the choppy performance so far this week and alternates gains with losses against the backdrop of mixed headlines from the UK-EU negotiation table.
Indeed, the 2-day EU Summit kicks in on Thursday with the Brexit talks on top of the agenda. So far, EU leaders already expect talks with the UK to continue in the next weeks despite important gaps in the negotiations yet remain unsolved. On this, UK negotiator Frost will meet PM Johnson later in the evening to assess the current situation. Hopes, however, are far from high and keep weighing on the quid so far.
Another driver hurting the British pound is the (mis?) handling of the coronavirus pandemic by the Tory government. According to latest news, the city of London will move into Tier 2 of the lockdown system.
Closer to home, jitters around the single currency met extra support as investors’ move to safer assets in response to the sharp pick-up in virus infections and major cities across Europe implementing tighter restriction measures on economic activity and social distancing.
Event-wise, and apart from the EU Leaders Summit, ECB’s Lagarde will participate in a debate on Global Economy at the IMF/World Bank Annual Meetings, while BoE’s Cunliffe will speak on “Early COVID-19 lessons for macroprudential policy” under the Financial Statements series at the Peterson Institute.
EUR/GBP key levels
The cross is up 0.39% at 0.9060 and faces the next up barrier at 0.9161 (monthly high Oct.7) followed by 0.9220 (high Sep.22) and then 0.9291 (monthly high Sep.11). On the other hand, a breach of 0.9007 (monthly low Oct.14) would expose 0.8865 (monthly low Sep.3) and finally 0.8670 (monthly low Apr.30).
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