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  • EUR/GBP managed to rebound from the su-0.89 area.
  • UK Manufacturing PMI came in at 55.2 in August.
  • EMU’s flash CPI show inflation lost momentum in August.

The rally in the sterling has been weighing on EUR/GBP in past weeks, forcing it to recede to the 0.8900 neighbourhood, recording at the same time new 3-month lows.

EUR/GBP in multi-month lows

EUR/GBP quickly reversed Monday’s advance, briefly testing the 0.8890 region albeit managing to regain the 0.8900 neighbourhood soon afterwards, where it is now trying to stabilize.

The broad-based selling bias around the greenback has been underpinning the recent rally in both the quid and the single currency, in turn putting the cross under further downside pressure and forcing it to shed nearly 2% since monthly peaks around 0.9070 (August 17).

In the docket, UK’s final manufacturing PMI came in a tad below consensus at 55.2 for the month of August. Despite the miss, the indicator stayed well within the expansionary territory, that is above the 50 threshold.

Closer to home, flash inflation figures in Euroland noted consumer prices are expected to deflate in August from previous readings, although falling well in line with the prevailing forecasts.

What to look for around GBP

The sterling has been gaining extra upside momentum since July, particularly vs. the greenback. In fact, dollar dynamics have mainly been behind the July-August rally, although the British pound is expected to face headwinds stemming from its own backyard in the next months, namely the deteriorating prospect from the UK-EU trade negotiation, the impact of the pandemic on the economy, unabated Brexit effervescence and the dovish stance from the Bank of England (BoE).

EUR/GBP key levels

The cross is losing 0.24% at 0.8906 and a breach of 0.8892 (weekly low Sep.1) would expose 0.8864 (monthly low Jun.9) and finally 0.8775 (200-day SMA). On the flip side, the next hurdle emerges at 0.9148 (monthly high Jul.27) followed by 0.9175 (monthly high Jun.21) and finally 0.9324 (2019 high Aug.12).

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