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  • EUR/GBP: awaits the outcome of the League and Five Star Movement (M5S)   coalition talks.
  • EUR/GBP  stays negative while capped by its downtrend from August last year at 0.8817.

EUR/GBP has popped to test the 100-DSMA and the resistance of the descending channel as the EUR/USD extends its  recovery advance from 1.1518 to 1.1725 today.

The euro was firmer today with Eurozone yields picking up modestly on the latest political headlines. both of the  Italian  party leaders have decided that the role of the minister of EU relations would be offered to both Paolo Savona and Giovanni Tria, (a pro-euro politician).

A  deal is far from certain:

“While the League and Five Star Movement (M5S) have just restarted coalition talks a deal is far from certain. In the absence of such an agreement, fresh elections loom and this time around they would be all about the euro, which is the type of referendum that would send a scare through global financial markets. Arguably the market’s gone from completely underappreciating the Italian political risks to fully pricing them in and then adding some exaggeration on top. Cooler heads may find it hard to prevail in the near-term though.”

EZ data

From data,  French CPI rose 2.0% y/y in May while Spanish Q1 GDP increased 0.7% Q/Q and 3.0% y/y, in line with expectations. Italian unemployment fell to 11.2% in April and the Eurozone inflation rose 1.9% y/y in May driven by oil prices with core inflation accelerating to 1.1% y/y in May. Finally,the  Eurozone unemployment dropped to 8.5% in April.  

EUR/GBP levels

However, analysts at Commerzbank explained that EUR/GBP’s outlook stays negative while capped by its downtrend from August last year at .8817 and its  200 day  ma at .8847, and we maintain a negative bias while capped here. “We will continue to target .8526, the 78.6% retracement of the move from 2017. En  route  are  the .8689/87 December and January lows. Further down sits the .8620 April low and a support line at .8560.”