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  • EUR/GBP pulls back from 0.9115 to consolidate right above 0.9000.
  • The pound appreciates across the board on hints of Brexit progress.
  • Failure to reach a trade deal might send the EUR?GBP to 0.93 – Rabobank.

The euro depreciated more than 1% against the pound on Wednesday retracing Tuesday’s rally. The EUR/GBP has pulled down from 0.9115 highs, retreating to levels right above 0.9000 with the pound boosted by upbeat Brexit news.

Pound picks up on hints of Brexit progress

The GBP has managed to pare losses on Wednesday, buoyed by news of progress on the Brexit talks with the EU. Negotiators of both parties have pointed out “some progress” in the talks this week and have shown their will to postpone the deadline beyond mid-October, easing fears of a no-deal exit which has increased demand for the sterling.

Later on, UK prime Minister Boris Johnson has “noted the desirability of a deal” after a call with Von der Leyden, which has confirmed the positive mood. Johnson has also shown his disappointment for not having made more progress over the last two weeks.

This is the best news regarding the Brexit for some time, although the impact on the pound has been moderate. The market is taking a wait-and-see approach ahead of the EU summit later this week, which might clarify the Brexit outcome and set the direction for the GBP crosses.

EUR/GBP might rush towards 0.93 if Brexit talks fail – Rabobank

Despite today’s progress, the Rabobank FX analysis team warns about a sharp EUR/GBP rally if the trade deal does not crystalize: “We expect EUR/GBP to struggle to break below 0.89 in the early months of next year. On the event that no trade deal is signed by the EU and the UK, we would expect a spike to the 0.93 region.”

EUR/GBP levels to watch