- The cross bounces off lows in the mid-0.8500s, back near 0.8600.
- The softer tone in the Sterling keeps supporting the daily rebound.
- Parliament vote on Brexit deal this week is ‘negligible’.
The now softer tone in the Sterling is helping EUR/GBP to rebound from daily lows in the mid-0.8500s and retake the proximity of the 0.8600 handle.
EUR/GBP up on GBP-selling, looks to Brexit
The European cross is fading the initial pessimism and continues to gather traction from daily lows in the 0.8560/55 band, always in tandem with the renewed selling bias hitting the British Pound.
GBP picked up extra downside traction today following disappointing news around the Brexit negotiations, where latest news said the chances of the House of Commons voting a Brexit deal this week appears ‘negligible’.
Earlier in the day, PM May’s spokesman highlighted the recent progress in talks (?) while stressing at the same time that further work needs to be done.
In the UK docket, Construction PMI dropped to the contraction territory in February, coming in at 49.5 from 50.6, all adding to the ongoing deterioration in the domestic fundamentals.
What to look for around GBP
The British Pound is expected to remain under the microscope in the next weeks in light of key votes in March 12/13/14. Following recent news, the probability of a second referendum has almost evaporated, while a ‘no deal’ cannot be ruled out and an extension of Article 50 emerges as the most likely scenario in the next months. On the broader picture, PM May made clear her intentions to remain in office to deal with the domestic agenda in the next months, opening at the same time another potential source of political uncertainty.
EUR/GBP key levels
The cross is losing 0.15% at 0.8587 facing the next support at 0.8528 (2019 low Feb.27) followed by 0.8402 (monthly low Feb.22 2017) and then 0.8382 (monthly low May 10 2017). On the other hand, a breakout of 0.8622 (high Mar.1) would expose 0.8629 (10-day SMA) and finally 0.8704 (21-day SMA).