EUR/GBP rebounds to the 0.8950 region, focus stays on politics, Brexit

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  • EUR/GBP reverses the recent downside and retakes 0.8950.
  • Scottish Court ruled that the suspension of Parliament was unlawful.
  • Uncertainty and the still likeliness of a ‘no deal’ weighs on GBP.

The now better tone around the shared currency is lifting EUR/GBP back to the mid-0.8900s, reversing at the same time three consecutive daily declines.

EUR/GBP attention remains on UK politics

The European cross has so far managed to keep the trade above the critical support at 0.89 the figure amidst rangebound trading prevailing around EUR and some weakness surrounding the Sterling.

Back to the UK political arena, the so-called ‘Yellowhammer’ contingency plan has been published by the government, outlining several worst-case scenarios in case of a hard UK-EU divorce at the end of October. The document highlights the probable occurrence of riots, increase in food prices and shortage of medical supplies, among others. Following the release of the ‘Yellowhammer’ document, Labour leader J.Corbyn urged the government to recall the Parliament.

In the meantime, a Scottish Court ruled on Wednesday that the recent suspension of the UK Parliament was unlawful.

Data wise, nothing in the UK after Wednesday’s auspicious labour market report. On this side of the Channel, German final CPI figures for the month of August fell in line with the preliminary readings, showing consumer prices contracted 0.2% inter-month and rose 1.4% YoY. Additional data saw Industrial Production in the broader euro area contracting 0.4% MoM during July and 2.0% from a year earlier, both prints coming in short of estimates.

What to look for around GBP

Some selling bias emerged around the British Pound and triggered a mild correction lower following recent positive results in the UK docket. However, the Sterling is forecasted to remain under scrutiny as political effervescence is far from abated… and a Brexit deal looks still ages away from resolving. All eyes are now on the developments from the UK political arena amidst the parliamentary inactivity and with all the looks pointing to mid-October, when the UK Parliament is due to re-open its doors and the Queen is expected to give her Speech. On another direction, BoE’s Vlieghe recently ruled out negative interest rates and talked down the likeliness of a recession in the country. Recent results appear to support his comments.

EUR/GBP key levels

The cross is gaining 0.22% at 0.8949 and faces the next resistance at 0.9054 (55-day SMA) followed by 0.9148 (monthly high Sep.3) and then 0.9324 (2019 high Aug.12). On the other hand, a drop below 0.8904 (monthly low Sep.9) would expose 0.8891(monthly low Jul.25) and then 0.8840 (200-day SMA).

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