EUR/GBP recedes from 2019 peaks near 0.9200

EUR/GBP clinched fresh 2019 highs just below the 0.9200 handle.
GBP sunk as Johnson pushes for ‘no deal’ scenario,
BoE seen holding key interest rate at Thursday’s meeting.

Pablo Piovano FXStreet

After clinching fresh 2019 highs in levels just below 0.9200 the figure, EUR/GBP has given away some gains and is now hovering around the 0.9160 region.

EUR/GBP bid on Brexit ‘no deal’

The European cross has picked up strong upside traction in tandem with increasing downside pressure around the Sterling, all in response to the insistence of PM B.Johnson to leave the EU without a deal.

PM Boris Johnson keeps claiming that the current withdrawal deal is ‘dead’ while he insists that the EU should drop the Irish backstop issue in order to resume talks that could lead to a fresh deal.

In the meantime, The British Pound sold off vs. both the greenback and the shared currency and stays well into the bearish side while prospects of a ‘no deal’ Brexit remain firm.

Later in the week, the Bank of England is expected to keep its refi rate unchanged as well as its asset purchase facility and forward guidance. In the same line, Governor M.Carney is seen reiterating that Brexit uncertainty continues to cloud the outlook for the UK economy.

What to look for around GBP

The Sterling remains under heavy selling pressure and it has quickly dropped to multi-month lows vs. both USD and EUR on rising fears of a Brexit ‘no deal’. Investors’ attention has now returned to UK politics amidst rising bets of a ‘no deal’ scenario, while any progress in the negotiations between London and Brussels is expected to exclusively gyrate around the Irish ‘backstop’ issue. Back to 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 gaining 0.44% at 0.9160 facing the next barrier at 0.9190 (2019 high Jul.30) seconded by 0.9225 (2016 high Oct.7) and finally 0.9306 (2018 high Aug.29). On the downside, a breach of 0.9051 (high Jul.17) would expose 0.8991 (21-day SMA) and then 0.8891 (monthly low Jul.25).

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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