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  • EUR/GBP sent packing on Brexit noise as we wait for Raab’s presser and update.
  • EUR/GBP on the verge of a test of R3 having  cleared key support levels already – too much too soon?

EUR/GBP has dropped in dramatic fashion, bursting below R1 and R2 and now en-route to R3 located at 0.8731 – all from highs 0.8791. All the move is related to dollar weakness and Brexit sound bites with the Dow Jones citing diplomats that negotiations are on solid grounds as follows:

  • EU, UK look to agree outline of future trade relationship by November – Dow Jones citing diplomats.
  • EU, UK. Narrow gaps on Ireland border but some differences remain.
  • EU, UK close to resolving all other exit terms issues.
  • If the exit deal reached, EU expected to sketch out views on future relationship next week.
  • EU, UK make progress in Brexit talks, divorce terms could be settled by Monday – diplomats.

However, somewhat bringing the hype down to ground a little, while also optimistic, and saying that there is a strong chance of reaching Brexit deal, Irish Foreign Minister Coveney said that November looks ‘more likely’ than October for a Brexit deal:

  • EU is showing a willingness to move.
  • Not sure if UK proposals will be enough.
  • Hopefully, we’ll get certainty over the next 6 weeks.
  • Unlikely that text for UK backstop will be published.
  • Don’t think we will have a no deal Brexit – Otherwise, it will be carnage.  
  • Need to give officials more time and space to work through issues, we will know a lot more on Monday and Tuesday.  

Meanwhile, we are waiting to hear from  UK Brexit secretary Dominic Raab  who is scheduled to deliver  a statement on negotiations to leave the European Union in parliament and having  updating parliament, we are waiting for a press conference where Raab is set to speak at 1745BST.

EUR/GBP levels

While the pair has run through key supports, R3 may be a step too far ahead of Raab and indeed, there are no confirmations over whether a deal is on the cards – nothing official. There are still differences over the Irish border, so that market does not want to get too ahead of itself. Looking across the board, the DXY remains above the key support at 95.70, but a break there could send EUR/USD higher with the index more weighted to the euro than sterling, potentially supporting the cross to come degree. However, a break below S3 opens 0.8700 and 0.8697 as the June low.