- The European cross retreated and tested daily lows near 0.8980.
- Brexit headlines continue to drive the sentiment around GBP.
- UK’s GDP expanded 0.2% MoM in November, bettering forecasts.
After a sudden drop to daily lows in the 0.8980 region, EUR/GBP has now managed to regain some ground and is now hovering over the key 0.9000 handle.
EUR/GBP looks to Brexit developments
The cross is reverting an auspicious start of the week and is now trading on the defensive for the second consecutive session, always with gains capped around the 0.9060 region. It is worth mentioning that the cross clinched fresh YTD peaks on January 3 in levels just shy of 0.9100 the figure.
As always, price action around the Sterling derived from the ongoing Brexit negotiations remain crucial for the cross. In fact, news that the Brexit deadline could be extended beyond March 29 gave an initial boost to the demand for the British Pound, in turn triggering the knee jerk in EUR/GBP to daily lows. However, government officials later denied such news.
In the UK docket, GDP figures expanded at a monthly 0.2% in November, surpassing initial estimates. Further releases saw Manufacturing Production contracting at a monthly 0.3% and Industrial Production down 0.4% inter-month during the same period. The trade deficit also missed consensus in November, widening to £12.02 billion from October’s £11.95 billion.
EUR/GBP key levels
The cross is now losing 0.23% at 0.8997 and a break below 0.8943 (2019 low Jan.4) would expose 0.8927 (low Dec.31 2018) and finally 0.8906 (55-day SMA). On the other hand, the initial hurdle emerges at 0.9061 (high Jan.11) seconded by 0.9092 (2019 high Jan.3) and then 0.9306 (2018 high Aug.29).