- EUR/GBP moves to 0.89, deflates afterwards.
- UK Q2 GDP came in at -0.2% QoQ and 1.3% YoY.
- Chancellor S.Javid plans to cut taxes in case of no-deal.
The better mood around the British Pound has prompted EUR/GBP to fade the initial spike to fresh tops just beyond 0.89 the figure.
EUR/GBP focused on data, politics
After three consecutive daily advances, the European cross appears to have met quite a tough barrier in the 0.89 neighbourhood, where converge the 21-day SMA and a Fibo retracement of the May-August rally.
On the Brexit front, Chancellor S.Javid said he has plans to cut taxes and boost spending in case of a no-deal scenario, all amidst a ‘significant economic policy response’.
All the looks will now shift to the Tory Party conference, which kicks in tomorrow in Manchester, while on the other side of the road, opposition parties will meet in order to outline their next steps regarding the Brexit process.
On the UK data sphere, latest GDP figures showed the economy contracted 0.2% during the April-June period and expanded 1.3% (vs. 1.2% forecasted) on a yearly basis. Other UK data noted the Current Account deficit shrunk to £25.2 billion on Q2 and Mortgage Approvals dropped to 65.55K during last month, missing consensus.
On this side of the Channel, German jobless rate stayed put at 5.0% and the unemployment Change shrunk by 10K, bettering estimates. Later in the day, the flash German CPI for the current month should keep the attention on EUR.
What to look for around GBP
The recent decision by the UK Supreme Court to declare unlawful the suspension of Parliament by PM B.Johnson reinforced the UK democratic system and brought in some fresh oxygen to the political front. However, it helped just a little – if anything at all – when comes to the Brexit process. Indeed, any attempt to solve the thorny issue around the Irish backstop has failed as well as any intention to fend off the spectre of a ‘no deal’ scenario, which at the moment remains well on the table either at the end of October or the end of January. The next key political event will be this week’s Tory Party conference, where the position and strength of PM B.Johnson will be in centre stage. Away from politics and back to the BoE, the recent comments from (former hawk) M.Sunders regarding the likelihood of a rate cut if the UK economic outlook worsens gave extra excuses to GBP-sellers to regain the upper hand towards the end of last week. His comments carry the potential to spark a division in the central bank’s ranks, as the ‘Old Lady’ remains reluctant to factor in a probable ‘hard Brexit’ into its projections for the time being.
EUR/GBP key levels
The cross is losing 0.24% at 0.8876 and a drop below 0.8785 (monthly low Sep.20) would expose 0.8667 (78.6% Fibo of the May-August rally) and finally 0.8488 (monthly low May 6). On the other hand, the next resistance emerges at 0.8906 (50% Fibo of the May-August rally) seconded by 0.8964 (100-day SMA) and then 0.9028 (55-day SMA).
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