13 Aug 2019
The now softer tone surrounding the single currency is prompting EUR/GBP to recede to the area of daily lows in the 0.9270 region.
The European cross is on the defensive today following yesterday’s doji price action and fresh 2019 highs beyond 0.9300 the figure.
In addition, the Sterling manages to regain some composure after UK labour market figures surprised to the upside in general. In fact, Average Earnings +Bonus rose at an annualized 3.7% during June while the unemployment rate ticked higher to 3.9% during the same period. On the brighter side, Claimant Count Change rose by 28.0K in July, bettering estimates and a tad lower than June’s gain.
In the meantime, the British Pound remains wary on headlines from the Brexit front, where the likelihood of a ‘no deal’ outcome continues to pick up pace and the renegotiation of the Irish backstop has been already ruled out ahead of the meeting between PM B.Johnson and Ireland’s L.Varadkar.
Still around Brexit, rumours are now on the rise over the possibility of snap elections just before October 31 in case PM B.Johnson loses a confidence motion.
In Euroland, the German/EMU ZEW survey is coming up next ahead of advanced Q2 GDP figures (Thursday).
The outlook on the British Pound looks increasingly fragile pari passu with rising odds for a Brexit ‘no deal’ on October 31. In the meantime, the Irish backstop remains the exclusive obstacle for the resumption of talks between London and Brussels, although the subject appears relegated in light of preparations for the worst-case scenario. Back to the UK economy, latest poor advanced Q2 GDP figures added to the already gloomy panorama from UK fundamentals, keeping the sour prospect for the economy and the currency unchanged. At last week’s BoE event, the central bank kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.
The cross is retreating 0.10% at 0.9275 and a drop below 0.9105 (21-day SMA) would expose 0.9088 (low Jul.31) and then 0.8991 (55-day SMA). On the flip side, the next up barrier is located at 0.9324 (2019 high Aug.12) followed by 0.9411 (monthly high Oct. 2009).
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