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  • EUR/GBP recovery attempt capped below 0.8920.
  • The euro trims losses after a two-day decline.
  • Longer-term, the euro is expected to remain trapped between 0.88 and 0.8900– Commerzbank.

The euro is going through a mild pick up on Tuesday, bouncing up from 0.8870 lows to trim loses after a two-day decline. The pair, however, has failed to consolidate above 0.8900 and remains dangerously close to multi-month lows at 0.8860.

The euro picks up as market sentiment improves

The cable has lost ground against a somewhat stronger euro on Tuesday, fuelled by a significant EUR/USD recovery over the European session, that has strengthened the common currency across the board. The pair, however, has lost ground during the US session although it remains positive on the daily chart.

Macroeconomic data has also been euro-supportive on Tuesday, with the German IFO Business Climate survey posting stronger than expected figures while German GDP showed that the economy performed better than expected in the third quarter.

Euro strength has been limited by a broadly positive pound, with the GBP/USD trading at multi-month highs, supported by market optimism regarding the progress on COVID-19 vaccines and the widespread confidence about an imminent Brexit deal.

EUR/GBP seen trapped between 0.88 and 0.89 for the coming months – Rabobank

From a wider point of view, the FX Analysis team at Rabobank sees the pair trading sideways over the next months: “(The) GBP still has a lot of hurdles to clear before investor confidence can increase another couple of notches and UK politics has the potential to sour the mood.  We are expecting that EUR/GBP will trade mostly in the 0.88/0.89 region in the coming months.”

Technical levels to watch