- EUR/GBP pares Thursday’s losses after bouncing up at 0.9000.
- The pound slides on Brexit and a dovish BoE.
Euro’s bearish reversal from 0.9065 highs on Thursday has lacked follow-through below 0.9000 and the pair regained lost ground on Friday to close the week slightly higher.
BoE and Brexit remain weighing on pound demand
The pound has lost ground against the euro on Friday, with the dust from the US election slowly coming down. The market is digesting the impact of the Bank of England’s dovish monetary policy decision on Thursday and the impasse on the Brexit negotiations with the deadline year-end deadline around the corner.
The Bank of England maintained its main interest rate unchanged at 0.1% and expanded its bond-buying program by £150 billion to a total target to £895. The day when the second lockdown kicked off in the UK, the bank increased its stimulus program to offset the economic impact of the COVID-19 crisis.
Furthermore, the standstill at the Brexit negotiations remains eroding confidence on the pound. Previous hopes of a trade deal have cooled off as the last two weeks of intensive talks have concluded without relevant advances and representatives from both parties reiterate that the postures are still far away in key issues.
The talks, however, are expected to continue in London over the weekend, which maintains hopes that a deal to avoid a hard exit from the Union is still possible. This is holding the GBP from sharper declines against its main peers.
Technical levels to watch
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