- EUR/GBP is higher at the start of the week following concerns over Brexit.
- EUR/GBP is currently trading at 0.8655, up from a high of 0.8643 and off the 0.8662 highs.
EUR/GBP is set for a rollercoaster week ahead of Brexit headlines. However, we also have German data on the cards which will be a major focus – “Despite weak headline production data, manufacturing sales data have been strong for 2 months now and pressures are building in the pipeline. We expect bottlenecks in Germany to have largely worked off in Jan, allowing IP to rebound very strongly, and reflecting strength seen elsewhere in last Friday’s data,” analysts at TD Securities explained.
Brexit in focus
The first risk this week will be the UK Monday press ahead of the vote on Tuesday. Here is some information you should know if you intend trading the event. Firstly, the vote will be held on Tuesday evening, following a full day of debate in the Commons – the time of the vote will be announced in due course.
This is THE vote and if the deal is voted down, its got to be one of two things:
- The UK will either leave the EU on 29 March without a withdrawal agreement, or;
- The departure date will be delayed.
However, should MPs support the deal, a permanent deal will then be negotiated while things will stay broadly as they are until December 2020 following Brexit that will occur on 29 March.
Markets suspect that despite the UK’s government minister’s attempts to persuade the EU into making concessions in order to get a deal through Parliament and acceptable to the MPs who voted against it in January, the deal will indeed be voted down on only minor tweaks to the existing agreement that was so badly defeated last time around.
However, while an initial punt to the downside in the pound on such sentiment is taking place, considering that MPs were promised a vote on whether the UK should leave without a deal or not, which would probably happen the following day, such an outcome would support the case for a delay to Brexit from the EU, so long as they do not back a no-deal Brexit – that vote will likely be on Thursday.
However, should May only lose by a small margin, the EU might be inclined to offer the UK some more time to get it over the line – The next EU summit in on 22 March which is where May would likely use as a platform to spur-up further support before she takes it back to The Commons for one final shove to the line.
Analysts at Commerzbank explained that rebounds will find nearby resistance offered by the 0.8694 accelerated downtrend and while capped here the market will remain offered. Below the channel targets the 200-weekk ma at 0.8377. It is on the defensive. Rallies are likely to find initial resistance at 0.8722 (22nd February high) ahead of 0.8791, 0.8852 (55 and 200 day ma).”