EUR/GBP abandons recent tops and retreats to the 0.9000 handle
- EUR/GBP comes under pressure and tests 0.9000.
- UK Retail Sales surprised to the upside in June.
- Likeliness of a ‘no deal’ scenario keeps on the rise.
The rebound in the Sterling is triggering a correction lower in EUR/GBP to the boundaries of the critical 0.9000 handle.
EUR/GBP upside capped around 0.9050
The British pound is seeing some relief for yet another session, helped this time by the renewed offered bias around the greenback and auspicious prints from Retail Sales for the month of June.
In fact, headline sales expanded at a monthly 1.0% during last month, reversing the previous 0.6% drop. Furthermore, Core sales followed suit, up 0.9% from a 0.4% contraction.
GBP thus managed to leave behind some of the recent weakness, although the bearish picture remains well and sound as a Brexit ‘no deal’ scenario keeps gathering momentum among investors. This option has particularly gained extra wings following recent comments from both Conservative candidates Jeremy Hunt and Boris Johnson.
What to look for around GBP
Rising uncertainty in the UK political scenario plus rising chances of a Brexit ‘no deal’ are expected to keep the downside pressure on the Sterling well and sound for the foreseeable future. In the UK economy, poor results from key fundamentals continue to add to the sour prospects for the economy in the months to come and collaborate further with the bearish view on the currency. On another direction, the overall tone from the BoE appears to have shifted towards a more dovish gear, while markets have started to price in the likeliness of a rate cut at some point in Q3/Q4.
EUR/GBP key levels
The cross is retreating 0.30% at 0.8999 and a break below 0.8966 (21-day SMA) would expose 0.8872 (low Jun.20) and then 0.8826 (low Jun.5). On the upside, the next hurdle aligns at 0.9051 (monthly high Jul.17) seconded by 0.9062 (high Jan.11) and finally 0.9092 (2019 high Jan.3).