EUR/GBP upside faltered in the 0.8960 area

• EUR/GBP’s upside momentum lost impetus near 0.8960 on Tuesday.
• UK’s Claimant Count Change rose by more than 850K in April.
• German, EMU Economic Sentiment coming up next on the data.

The broad-based better mood in the riskier assets is dragging EUR/GBP back to the 0.8930 area after hitting fresh 2-month tops in the 0.8960 region on Monday.

EUR/GBP offered post-UK data

After clinching 2-month peaks in the 0.8960 zone at the beginning of the week, EUR/GBP is now receding to the 0.8930 area as market participants continue to lean towards the riskier assets.

In fact, the greenback keeps correcting lower on the back of the better sentiment surrounding the risk complex, all morphing into further oxygen for both the quid and the single currency. News of extra advances from an American biotech regarding a potential vaccine for the COVID-19 propped up the change of mood in the market participants on Monday, while the relentless recovery in crude oil prices also added to the generalized optimism.

In the docket, the UK’s unemployment rate ticked a tad lower to 3.9% in March and the Claimant Count Change increased by 856.5K, surpassing previous estimates. Later in the morning, the German/EMU Economic Sentiment tracked by the ZEW survey will be the salient publication this side of the Channel.

What to look for around GBP

The British Pound is the worst performing G10 currency so far this month. Indeed, the quid appears to have met quite a significant barrier above the 1.2600 mark vs. the greenback (200-day SMA) and the 0.8660 area vs. the euro (April lows). Moving forward, the sterling is expected to remain under pressure against the backdrop of rising scepticism over the handling of the coronavirus crisis by the UK government and the potential re-opening of the economy, all amidst the forecasted deep recession the country is expected to face in the first half of the year. Further weakness also stems from the probability that the UK would not ask for an extension of the transition period (deadline on June 30^th), opening the door to hard UK-EU trade negotiations. In addition, the sterling risks extra downside pressure on the tangible probability that the BoE could pump in extra stimulus in the next months.

EUR/GBP key levels

The cross is losing 0.21% at 0.8930 and a drop below 0.8848 (55-day SMA) would expose 0.8710 (200-day SMA) and then 0.8670 (monthly low Apr.30). On the upside, the initial resistance emerges at 0.8960 (monthly high May 18) followed by 0.9019 (monthly high Oct.20 2019) and finally 0.9324 (2019 high Aug.12).