EUR/GBP bounces off daily lows, back near 0.8760
- The cross met support in the 0.8745/40 band so far today.
- The Sterling appears sidelined, easing some upside momentum.
- Key vote in the UK Parliament due on February 27.
The sideline performance around the British Pound coupled with some buying interest in the European currency is prompting EUR/GBP to trade with small gains in the 0.88760 region.
EUR/GBP supported near 0.8740
The European cross dropped and tested daily lows in the 0.8740 region during early trade, managing to regain some attraction amidst the generalized improved mood in the riskier assets.
In the meantime, the cautious tone is expected to prevail around GBP along with increasing uncertainty surrounding the Brexit negotiations. Today, several Labour MPs are expected to resign from the party, with some kind of announcement due later in the day.
In the UK docket, the monthly labour market report is due tomorrow seconded by the CBI Industrial Trends Orders on Wednesday.
What to look for around GBP
The Sterling is expected to remain under increasing pressure as the clock continues to tick and there is no progress on the horizon (or even any hint of it) in the UK-EU divorce negotiations. So far, consensus among market participants points to a most likely extension of Article 50 in the next weeks or a deal on the 11th hour. However, the Irish backstop issue stays unsolved and a ‘hard’ scenario remains on the table ahead of the crucial vote on February 27. This, in combination with soft inflation figures as of late and prospects of extra deterioration in UK fundamentals should be enough to keep occasional rallies in GBP well capped.
EUR/GBP key levels
The cross is now gaining 0.06% at 0.8763 facing the next hurdle at 0.8774 (10-day SMA) followed by 0.8840 (high Feb.14) and finally 0.8860 (200-day SMA). On the downside, a breach of 0.8728 (low Feb.7) would expose 0.8655 (low Nov.13 2018) and then 0.8616 (2019 low Jan.25).