- EUR/GBP witnessed some fresh selling on Friday and reversed the overnight positive move.
- Not so positive Brexit developments raised hopes for an extension of the transition period.
- Dovish ECB expectations weighed on the euro and further contributed to the selling bias.
The EUR/GBP cross witnessed some selling during the first half of the European trading session and dropped to fresh daily lows, around the 0.8925 region in the last hour.
Following an early uptick to the 0.8960 region, the cross met with some fresh supply on the last trading day of the week and has eroded a major part of the previous day’s positive move. The British pound was supported by hopes for an extension to the Brexit transition period and got an additional boost following the release of stronger-than-expected UK retail sales figures.
It is worth recalling that Brexit talks were suspended on Thursday after a member of the EU team was tested positive for COVID-19. That said, the EU negotiating team briefed envoys of the 27 member states that Brexit talks remain unresolved on three main issues – level playing field, fisheries and state-aid rules – though did little to prompt any selling around the sterling.
On the other hand, the shared currency remained a relative underperformer amid expectations that the European Central Bank will announce additional monetary stimulus in December. This, in turn, contributed to the EUR/GBP pair’s intraday slide, which marks the third day of a negative move in the previous five.
It will now be interesting to see if the EUR/GBP cross can find any support at lower levels or breaks through the 0.8900 round-figure mark, setting the stage for a further near-term depreciating move. Nevertheless, the incoming Brexit-related headlines will continue to play a key role in influencing the pair’s near-term momentum.
Technical levels to watch
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