EUR/GBP drops and test the vicinity of 0.8900 on EUR selling
- EUR/GBP loses upside traction near 0.8950.
- The selling mood around EUR weighs on the cross.
- ‘No deal’ Brexit scenario remains well on the cards.
The now selling mood around the shared currency is dragging EUR/GBP to test the proximity of the 0.8900 handle, although meeting quite decent contention around that level.
EUR/GBP looks to risk trends, UK politics
The European cross is trading on the defensive for the first time after three consecutive daily advances, and still remains unable to break above the key resistance area in the mid-0.8900s.
The single currency came under some selling pressure during the morning in the Old Continent on the back of declining German yields, some nervousness around the Italian political scenario and dovish ECB chatter.
In the UK, the focus of attention remains on the successor of Theresa May at Number 10. In this regard, Brexiteer candidate Boris Johnson remains well in the lead for the time being, although opposition to his ‘no deal’ stance continues to grow among party members. Johnson said earlier in the day that former PM May’s deal was ‘dead’. He added that he does not believe the UK will leave the EU without a deal despite he is willing to do so.
It is worth recalling that the new Conservative leader will be announced on July 23.
What to look for around GBP
Rising uncertainty in the UK political scenario is expected to keep the cautious tone in the British Pound, while USD-dynamics emerged as the exclusive driver for the recent price action in Cable, although its sustainability remains to be seen. In the UK economy, mixed-to-poor results from fundamentals continue to add to the sour prospects for the economy in the months to come. On another direction, the overall tone from the BoE appears to have shifted towards a more neutral (dovish?) gear, while uncertainty around Brexit is seen as the main obstacle in determining the next move on rates.
EUR/GBP key levels
The cross is losing 0.13% at 0.8933 and faces the next down barrier at 0.8872 (low Jun.20) followed by 0.8826 (low Jun.5) and then 0.8778 (200-day SMA). On the other hand, a break above 0.8974 (monthly high Jun.17) would expose 0.9062 (low Jan.11) and finally 0.9092 (2019 high Jan.3).