- EUR/GBP keeps the rally well and sound above the 0.88 handle.
- The sell-off in the Sterling remains the exclusive driver behind the drop.
- Uncertainty around May’s government keeps gathering pace.
The bearish note around the British Pound has given extra wings to EUR/GBP, which managed to clinch fresh tops near 0.8850 earlier in the session.
EUR/GBP focused on Brexit woes
The European cross is prolonging its impressive rally so far today, already gaining more than 4% since early month lows in sub-0.8500 levels and advancing for 14 straight sessions, including the break above the critical 200-day SMA.
As usual the increasing selling bias around the Sterling has been fuelled by uncertainty around the UK government, where it seems the days in Number 10 would be numbered for PM Theresa May.
Fanning the flames, Commons Leader A.Leadsom has stepped down yesterday in clear opposition to May’s Brexit plans and a potential fourth vote at the House of Commons in early June.
What to look for around GBP
Heightened uncertainty around the Brexit negotiations and May’s government has intensified in past hours, forcing the Sterling to shed further ground. Investors’ focus now seems to have shifted to the likeliness of further resignations by MPs, which could accelerate the departure of PM May. On another direction and back to the UK economy, recent publications from the industrial sector somewhat confirmed the rebound seen in the previous months, although the bounce in activity was exclusively driven by companies stockpiling in case of a ‘hard Brexit’ scenario rather than in response to a more ‘genuine’ recovery in the sector. Further out, the current steady stance from the Bank of England appears justified by below-target inflation figures, mixed results from key economic fundamentals and somewhat slowing momentum in wage inflation pressures, all adding to speculations of a ‘no-hike’ this year despite some calls signalling a potential hike in November.
EUR/GBP key levels
The cross is gaining 0.09% at 0.8809 and a break above 0.8840 (monthly high Feb.14) would expose 0.9062 (low Jan.11) and finally 0.9092 (2019 high Jan.3). On the downside, initial contention aligns at 0.8742 (high May 21) seconded by 0.8680 (100-day SMA) and then 0.8620 (55-day SMA).