- EUR/GBP moves further north of the 0.89 handle.
- The irish backstop is back to the fore.
- Johnson’s plan for alternative backstop rejected by EU.
The selling bias around the Sterling is now helping EUR/GBP to pick up extra pace today and advance further north of 0.89 the figure.
EUR/GBP looks to Brexit, UK politics
The European cross is up for the second session in a row on Wednesday following the renewed weak note surrounding the British Pound.
Indeed, GBP debilitated further today after PM B.Johnson’s alternative plan to the Irish backstop was deem as ‘unacceptable’ by EU officials (as widely expected).
In fact, PM B.Johnson has clinched a secret deal with Northern Ireland’s Democratic Unionist Party (DUP) in order to put forward another Brexit plan. Johnson’s idea of two borders in Ireland for 4 years was not welcomed by EU officials, pouring some cold water over expectations of a breakthrough in the negotiations.
In the meantime, all the attention will be on the speech by Johnson at the Tory Party conference in Manchester later in the day.
What to look for around GBP
The recent decision by the UK Supreme Court to declare unlawful the suspension of Parliament by PM B.Johnson reinforced the UK democratic system and brought in some fresh oxygen to the political front. However, it helped just a little – if anything at all – when comes to the Brexit process. Indeed, the latest alternative plan to the current Irish backstop put forward by PM Johnson is unlikely to get any serious attention from EU negotiatiors, leaving the door open for extra uncertainty around the issue. The next key political event will be today’s speech by the PM at the Tory Party conference. Away from politics and back to the BoE, the recent comments from (former hawk) M.Sunders regarding the likelihood of a rate cut if the UK economic outlook worsens gave extra excuses to GBP-sellers to regain the upper hand towards the end of last week. His comments carry the potential to spark a division in the central bank’s ranks, as the ‘Old Lady’ remains reluctant to factor in a probable ‘hard Brexit’ into its projections for the time being.
EUR/GBP key levels
The cross is up 0.43% at 0.8920 and faces the next hurdle at 0.8936 (monthly high Oct.1) seconded by 0.8968 (100-day SMA) and then 0.9004 (38.2% Fibo of the May-August rally). On the downside, a drop below 0.8785 (monthly low Sep.20) would expose 0.8667 (78.6% Fibo of the May-August rally) and finally 0.8488 (monthly low May 6).
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