- EUR/GBP returns to the mid-0.90s after testing 0.9080/85.
- UK Services PMI dropped to 50.6 in August.
- UK now faces the probability of general election in mid-October.
The renewed buying interest in the Sterling has prompted EUR/GBP to give away recent gains and move back to the 0.9050 region on Wednesday.
EUR/GBP looks to UK politics, data
The European cross has come under renewed pressure in the last couple of days following Tuesday’s rejection from weekly tops in the 0.9150 region.
In fact, the British Pound regained composure and managed to reverse recent weakness in response to rising expectations that the ‘no deal’ scenario could be eventually avoided.
Those hopes garnered extra traction on Tuesday after PM Boris Johnson was defeated by rebel Tories and MPs who were opposed to a hard EU-UK divorce.
Critical hours for the Pound lies ahead as later today the House of Commons will vote on a Brexit delay bill. If approved, MPs will then vote on the call for general elections, likely at some point during October.
In the docket, final Services PMIs in Euroland came in on the positive side with the exception of Italy, while the UK’s gauge surprised to the downside at 50.6. Later in the day, Retail Sales in the broader euro area are due along with the speech of ECB’s Lane.
What to look for around GBP
The recent defeat of PM B.Johnson gave extra hopes to those favouring a final Brexit deal. However, chances of a ‘no deal’ scenario remain firm and all the attention has now shifted to upcoming votes on a bill to delay the Brexit deadline and a potential call for general elecions. On another direction, the BoE keeps the ‘radio silence’ regarding Brexit. It is worth recalling that, at its last meeting, the central bank refused to incorporate the likeliness of a ‘hard divorce’ scenario to its projections.
EUR/GBP key levels
The cross is losing 0.20% at 0.9059 and a drop below 0.9016 (low Aug.27) would expose 0.8916 (100-day SMA) and then 0.8891 (monthly low Jul.25). On the other hand, the next up barrier emerges at 0.9148 (high Sep.3) followed by 0.9183 (high Aug.20) and finally 0.9324 (2019 high Aug.12).
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