- EUR/GBP moves higher to the 0.9170 region, weekly tops.
- GBP resumed the downside on lack of Brexit news.
- Irish backstop remains key issue in UK-EU (no) talks.
The British Pound has resumed the downside following a moderate rebound during the second half of last week and is now pushing EUR/GBP to the upper end of the range in the 0.9170 region.
EUR/GBP up on UK politics, Brexit limbo
The European cross is adding to Monday’s gains and prolonging the rebound from last week’s lows in sub-0.9100 levels, always against the backdrop of the deterioration in both the UK political and Brexit scenarios.
In fact, PM Boris Johnson insisted today that the Irish backstop should be removed from the current deal to allow for the continuation of the negotiations between Brussels and London. However, Irish PM Leo Varadkar already told B.Johnson that neither the current Brexit deal nor the Irish backstop could be re-opened/amended.
Further out, PM B.Johnson is expected to meet German Chancellor A.Merkel and French President E.Macron later in the week.
In the docket, early releases saw German Producer Prices coming in above estimates during July, while UK’s CBI Industrial Trend Orders improved to -13 for the current month.
What to look for around GBP
A slap of reality is forcing the Sterling to give away part of the recent advance and re-focus instead on the increasing uncertainty in the UK political arena, where Labour leader J.Corbyn and his plans to be an interim PM remain in centre stage. Aside from this political issue, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of the continuation of preparations for the ‘hard-divorce’ case. Back to the UK economy, this week’s releases brought in some respite to the Sterling following latest poor advanced Q2 GDP figures. At its last meeting, the BoE kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
EUR/GBP key levels
The cross is gaining 0.44% at 0.9175 and faces the next hurdle at 0.9214 (10-day SMA) followed by 0.9324 (2019 high Aug.12) and then 0.9411 (monthly high Oct. 2009). On the flip side, a drop below 0.9088 (low Jul.31would expose 0.9020 (55-day SMA) and then 0.8891 (monthly low Jul.25).