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  • GBP dumped after UK PM Johnson likely to suspend Parliament until Oct 14th.  
  • EUR/USD remains muted below 1.11 handle amid Italian political uncertainties.
  • All eyes on the UK Cabinet’s conference call for fresh impetus.

The EUR/GBP cross is seen reversing a massive 100-pips rally to four-day highs of 0.9122, but remains close to the 0.91 handle, as markets digest the latest UK political headlines.

UK Cabinet to hold a conference call on Wednesday morning – BBC

Having consolidating near multi-week lows of 0.9015 almost throughout the Asian trades, the cross saw aggressive buying in the European session and jumped almost a   big figure, in reaction to the latest UK political news that intensified no-deal Brexit fears and hammered the pound across the board.

According to the media reports, the UK PM Johnson may ask the Queen to prorogue parliament as early as today, while announcing the Queen’s speech on October 14th. This implies that the Parliament will be suspended, preventing the UK lawmakers to attempt any move to stop a no-deal Brexit.

In such a scenario, Parliament could move quickly to a vote of no confidence in Johnson’s government, the UK Conservative lawmaker Grieve said. Meanwhile, the UK Chief  Brexit  Adviser David Frost is headed to Brussels on Wednesday, in an effort to push the EU leaders towards revoking Irish backstop with alternative solutions. All in all, the Brexit uncertainty continues to grow and will continue to remain a drag on the pound.

On the EUR-side of the equation, Italy’s opposition Democratic Party (PD)  and ruling 5 Star Movement continue their talks on forming a coalition and some optimism seen as the PD Chief Zingaretti says he has accepted Conte to be prime minister in talks. Despite the positive developments, the EUR/USD pair fails to benefit amid persisting Eurozone economic growth concerns and increased odds of an ECB stimulus.

Looking ahead, the Brexit-related headlines will continue to remain the main market driver for the pound, in turn impacting the EUR/GBP cross.

EUR/GBP Levels to watch