- EUR/GBP ticks up to test session highs at 0.8920 area.
- Longer-term, the pair remains directionless, trapped between 0.8865 and 0.8940.
- Brexit risks might push the euro up to 0.9200 – Danske Bank.
The euro is crawling higher against the British pound on Wednesday to test session highs in the vicinity of 0.8920. The common currency has appreciated about 20 pips during the US trading time, with the euro reaching fresh 3-month highs against the US dollar, although a bigger picture shows the pair looking for direction, trapped between 0.8865 and 0.8940.
The pound remains heavy
Despite the 5,5% rally in the GBP/USD over the last three weeks, the pound has failed to post any relevant advance against the euro. Investors’ concerns about the lack of advance in the Brexit negotiations combined with the high COVID-19 death toll in the UK and market speculation the BoE might be considering negative interest rates are weighing on the GBP.
Brexit uncertainty is being a major deterrent to pound investors. The market is growing increasingly wary about the possibility of a no-deal exit from the EU, as the successive rounds of talks with the Union are failing to deliver any relevant progress and the UK Government refuses to extend the transition period, which expires at the end of 2020.
EUR/GBP: Brexit fears might push the euro to 0.9200 – Danske Bank
The FX analysis team at Danske Bank expects the pound to remain vulnerable until the Brexit situation clarifies, “We are still of the view that a repricing of the Brexit risk premium will send EUR/GBP higher, mirroring similar events in late 2018 and summer 2019. While we target EUR/GBP at 0.90 in 1-3M, we would not be surprised to see the cross move as high as 0.92.”
EUR/GBP key levels to watch
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