- EUR/GBP corrects lower after surpassing 0.9300.
- Probable ‘no deal’ outcome on October 31 stays on the cards.
- GBP appears bid at the beginning of the week.
The now better mood around the British Pound is dragging EUR/GBP to the mid-0.9200s following the opening bell in the Old Continent on Monday.
EUR/GBP retreats from 0.93 and above
The European cross met a wave of selling orders soon after it recorded fresh 2019 highs in the vicinity of 0.9330 during early trade.
However, renewed buying interest in the Sterling coupled with increasing selling pressure in the shared currency are dragging the cross back to the 0.9250 region.
Looking at the broader picture, there is now news regarding Brexit other than odds for a ‘no deal’ scenario by end of October keeps gathering traction.
In the docket, the German ZEW survey is due tomorrow along with the UK labour market report. Later in the week, UK Retail Sales and inflation figures should keep the attention on the Pound.
What to look for around GBP
The outlook on the British Pound looks increasingly fragile pari passu with rising odds for a Brexit ‘no deal’ on October 31. In the meantime, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of preparations for the worst-case scenario. Back to the UK economy, latest poor advanced Q2 GDP figures added to the already gloomy panorama from UK fundamentals, keeping the sour prospect for the economy and the currency unchanged. At last week’s BoE event, the central bank kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
EUR/GBP key levels
The cross is retreating 0.57% at 0.9257 and a drop below 0.9090 (21-day SMA) would expose 0.9088 (low Jul.31) and then 0.8982 (55-day SMA). On the flip side, the next up barrier is located at 0.9324 (2019 high Aug.12) followed by 0.9411 (monthly high Oct. 2009).