- Focus for the start of the week was with Parliament returning from summer recess.
- EUR/GBP on the front foot, however, bulls are hardly in a strong position, downside eyed.
EUR/GBP has stabilised in the 0.90s from a firm support and double bottom while the Pound struggles in an environment of Brexit tensions combined with disappointing manufacturing data. EUR/GBP is currently trading at 0.9093, +0.68%, having travelled between 0.9025 and 0.9108.
The focus for the start of the week was with Parliament returning from summer recess and expectations of rebel MPs seeking to block a no-deal and a vote of no confidence from the opposition party's leader seeking a snap general election hoping to bring forward legislation blocking a no-deal Brexit later this week.
However, Conservative MPs voting against the government could be given the boot, backfiring on the movement and ramping up chances of a no-deal Brexit. Following a cabinet meeting at Downing Street, PM Johnson made a public statement and made it clear that he will not ask for an extension and that the UK will leave on October 31st with or without a deal.
"I don't want an election, you don't want an election...let's get Brexit done by October 31st,"
Johnson said.
Prior to the event, the Pound was already on the backfoot. British factory activity hit a seven-year low in August, also contributing to the pound’s fall. The IHS Markit/CIPS U.K. Manufacturing Purchasing Managers’ Index (PMI) fell to 47.4 from 48 in July and business optimism dropped to a record low.
ECB easing to hamper bulls advances
However, bulls are hardly in a strong position considering the state of the eurozone. Attempts to the upside are capped at a familiar resistance band and net EUR short positions increased modestly last week ahead of the European Central Bank meeting scheduled for later this month and prospects of policy easing.
EUR/GBP levels
Analysts at Commerzbank explained that EUR/GBP last week saw a slight erosion of the 55-day ma at 0.9049, but note hat the daily Elliott wave count is continuing to suggest that the correction lower should remain limited:
"It is unclear if the correction is over or not and we remain unable to rule out a deeper sell-off to the 50% retracement at 0.8896 at this stage. In this vicinity we look for stabilisation and recovery. Near term rallies are likely to find initial resistance at 0.9191, the 30th July high. This guards the 0.9327 recent high. Above 0.9327 targets 0.9403, the 2016 high and eventually 0.9803."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.