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  • The cross stays parked around the 0.8700 handle so far.
  • The Sterling remains cautious, focused on Brexit headlines.
  • Article 50 is likely to be extended. May hopes to stay beyond Brexit.

The better mood around the British Pound is driving EUR/GBP somewhat lower to the 0.8680 region at the beginning of the week.

EUR/GBP remains sidelined on Brexit uncertainty

The Sterling is up smalls at the beginning of the week following rumours of a probable extension of Article 50. Despite the news, PM May talked down that possibility at the EU-Arab Summit in Egypt.

In addition, PM Theresa May reiterated her intentions to remain in office following Brexit in order to deal with the domestic agenda. In this regard, her comments came amidst increasing opposition from several ministers, who expect her to quit around May.

In the UK docket, the BoE’s Inflation Report Hearings are due tomorrow seconded by the GfK Consumer Confidence (Thursday) and manufacturing PMI (Friday).

What to look for around GBP

The Sterling is expected to remain under increasing pressure as the clock continues to tick and there is no progress on the horizon (or even any hint of it) in the UK-EU divorce negotiations. A probable extension of Article 50 might buy some time for lawmakers to come up with some more credible options, particularly around the Irish backstop. On a broader scenario, PM May’s intentions to stay in No.10 promise to open another potential source of political uncertainty. This, plus deteriorating fundamentals in the UK economy should keep a serious bullish attempt in GBP somehow limited.

EUR/GBP key levels

The cross is gaining 0.04% at 0.8678 and a breakout of 0.8728 (10-day SMA) would aim for 0.8741 (21-day SMA) and finally 0.8840 (high Feb.14). On the flip side, the next support aligns at 0.8666 (low Feb.21) seconded by 0.8655 (low Nov.13 2018) and then 0.8616 (2019 low Jan.25).