EUR/GBP tumbles further, breaks below the 0.8800 handle
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EUR/GBP tumbles further, breaks below the 0.8800 handle

  • The cross comes under pressure around the 0.8800 handle.
  • UK Retail Sales surpassed estimates during the last month.
  • House of Commons could vote on May’s plan on February 27.

The now better tone around the Sterling is forcing EUR/GBP to retreat to the area of session lows in the 0.8800 neighbourhood.

EUR/GBP weaker on GBP-buying

The European cross is fading part of yesterday’s advance and is coming under increasing selling pressure today in response to a pick up in the demand for the British Pound, particularly after earlier results in the UK docket.

Recall that UK Retail Sales surprised to the upside in January, expanding 1.0% MoM and 4.2% on a yearly basis.

In the meantime, another loss of PM May at the Parliament on Thursday barely moved the dial around GBP, as the defeat was largely expected. The following key step regarding the negotiations around the UK-EU divorce will be another vote on a probable variation of May’s plan most likely on February 27.

What to look for around GBP

Another defeat of PM May yesterday passed largely unnoticed among investors. The British Pound is expected to remain under increasing pressure as the clock continues to tick and there is no progress on the horizon (or even any hint of it). So far, consensus among market participants points to a most likely extension of Article 50 in the next weeks or a deal on the 11th hour. However, the Irish backstop issue stays unsolved and a ‘hard’ scenario remains on the table. Adding to this picture, soft inflation figures as of late and prospects of extra deterioration in UK fundamentals should be enough to keep occasional rallies in GBP well capped.

EUR/GBP key levels

The cross is now losing 0.28% at 0.8796 facing the next support at 0.8779 (10-day SMA) followed by 0.8755 (21-day SMA) and then 0.8743 (low Feb.13). On the upside, a breakout of 0.8840 (high Feb.14) would expose 0.8861 (200-day SMA) and finally 0.8884 (55-day SMA).

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