EUR/GBP met weekly support near 0.8830, the 200-day SMA

• EUR/GBP recovers from Monday’s pullback, back near 0.8870.
• UK manufacturing PMI surprised to the upside at 48.3.
• EMU flash CPI seen at 0.9% YoY in September. Core CPI at 1.0% YoY.

The recovery in the shared currency is helping EUR/GBP to regain further composure and advance to the vicinity of 0.8880 on Tuesday.

EUR/GBP focused on UK politics, data

The European cross manages well to leave behind the pessimism at the beginning of the week, rebounding from the 200-day SMA in the 0.8830 region to the current 0.8880 area. On a daily basis, today’s drop met support at the 10-day SMA in the mid-0.8800s.

On the Sterling side, the better-than-expected manufacturing PMI for the month of September failed to ignite any lasting upside interest, as according to Markit, UK manufacturers have started to stockpile once again ahead of the Brexit deadline on October 31^st.

Still on GBP, and back to the key Irish backstop issue, PM Boris Johnson said earlier today that once the UK leaves the EU, customs checks on Ireland would be reinstated.

In the euro region, preliminary inflation figures for the broader Euroland for the month of September now see consumer prices rising 0.9% on a yearly basis, while prices excluding food and energy costs are seen up 1.0% from a year earlier.

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, any attempt to solve the thorny issue around the Irish backstop has failed as well as any intention to fend off the spectre of a ‘no deal’ scenario, which at the moment remains well on the table either at the end of October or the end of January. The next key political event will be this week’s Tory Party conference, where the position and strength of PM B.Johnson will be in centre stage. 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 gaining 0.16% at 0.8876 and a drop below 0.8831 (200-day SMA) would aim for 0.8785 (monthly low Sep.20) and then 0.8667 (78.6% Fibo of the May-August rally). On the other hand, the next resistance emerges at 0.8906 (50% Fibo of the May-August rally) seconded by 0.8966 (100-day SMA) and then 0.9025 (55-day SMA).