- EUR/GBP was turning lower again overnight within the consolidation at the top of the recent recovery from a touch off 0.89 the figure.
- However, while UK retail sales for July were a beat, Brexit angst trumps the data and the pound remains fragile, contained by the 100-hr SMA vs the greenback and so far unable to break the prior resistance turned support today down in the 0.8930’s.
EUR/GBP bulls made territory back in the rising channel formed back in late June down at 0.8730. The pound has been under pressure and only a break above the 10-D SMA vs the dollar might send a message to the bulls that the sterling is making a comeback, *back above the descending support line (29th May downside in cable).
Meanwhile, with respect to the retail sales data, again, markets are looking forward and are more concerned over a no deal Brexit. As analysts at ING pointed out, the UK government prepares to outline its contingency plans for ‘no deal’, it’s not clear how consumers will react:
“We doubt the risk of ‘no deal’ is on many consumer radars at this stage. But if talks remain in deadlock as March 2019 draws nearer, a few dramatic headlines warning of shortages and other potential risks could feasibly see consumers take a more cautious stance – particularly if people perceive their jobs to be at greater risk.”
Brexit talks between the EU and UK have resumed today in Brussels
“Ssources’ quoted the UK press have thrown cold water on talk that PM May could led a discussion on Brexit with other EU leaders at a summit next month. Although May has recently met with Merkel and Macron, the EU is insisting that all formal talks are led by negotiator Barnier. In July Barnier picked apart May’s latest White Paper proposals on Brexit. Meanwhile, UK Foreign Secretary Hunt warned yesterday that a “no deal” Brexit could lead to a sharp fall in sterling and that the UK would undergo a “choppy and difficult period” in the coming months. Since GBP is currently around 14% lower vs. the EUR relative to its pre-Brexit referendum levels, it would seem unlikely that Hunt’s remarks came as a surprise to anyone,”
analysts at Rabobank explained.
EUR/GBP levels
0.9034 as the October 2017 high comes in as the key upside target on a clearance of this resistance at 0.9015/20 (Nov 2017 highs). 0.9308 comes as the August 2017 high. To the downside, the 2-month uptrend at 0.8877 guard risk down to the 0.8720 triangle lows, (the 15th June low). Further out, the double bottom lows at 0.8697 are exposed.
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