- EUR/GBP gained strong positive traction for the second consecutive session on Friday.
- Increasing Risk of a no-deal Brexit took its toll on the sterling and remained supportive.
- Expectations for further BoE rate cuts further aggravated the intraday bearish pressure.
The EUR/GBP cross maintained its strong bid tone through the mid-European session and climbed to the highest level since September 23 in the last hour. The cross now seems to have cleared a resistance marked by a multi-month-old descending trend-line, with bulls looking to build on the momentum further beyond the 0.9200 mark.
The cross added to the previous day’s post-ECB bullish move and gained some strong follow-through traction for the second consecutive session on Friday. The British pound remained under intense selling pressure amid rising fears of a no-deal Brexit, which, in turn, was seen as one of the key factors driving the EUR/GBP cross higher.
British Prime Minister Boris Johnson said on Thursday there was a strong possibility an agreement would not be clinched. Adding to this, the European Commission President Ursula von der Leyen reportedly told EU leaders during an EU summit in Brussels this Friday that she has low expectations about reaching a deal with the UK.
Apart from this, increasing bets for a further interest rate cut by the Bank of England (BoE) further seemd to have aggravated the bearish pressure surrounding the sterling. In fact, monetary markets are pricing in a 65% probability of 10 bps reduction in rates by March 2021 as against 16% at the start of the month.
With the GBP price dynamics turning out to be an exclusive driver, the strong intraday momentum seemed rather unaffected by a modest pullback in the EUR/USD. Nevertheless, a move beyond a descending trend-line resistance might have already set the stage for an extension of the ongoing bullish trajectory for the EUR/GBP cross.
However, bullish traders might opt to lighten their bets amid overbought conditions on intraday charts and prefer to wait for the outcome of the post-Brexit trade talks. Negotiators still have time until the end of the week to hammer out a compromise deal.
Technical levels to watch
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