EUR/GBP stays depressed above 0.8900
- EUR/GBP rebounds from Monday’s low near 0.89.
- UK labor market report surprised to the upside.
- UK PM B.Johnson failed once again to pass a bill calling for elections.
Both the Sterling and the single currency appears to be losing some shine on Tuesday, leaving EUR/GBP to trade on the defensive in the 0.8940/50 band.
EUR/GBP focused on UK politics, ECB
The European cross remains weak and is extending the pessimism at the beginning of the week, although it has so far managed to hold on above the critical support at 0.89 the figure.
The British Pound is coming under some mild downside pressure after hitting tops vs. both the Euro and the Dollar, always on the back of the improved scenario around Brexit, particularly as market participants perceive that the likelihood of a ‘no deal’ outcome appears to be fading away.
Back to UK politics, PM Boris Johnson failed once again on Monday to pass a bill calling for early elections as soon as in mid-October. The UK Parliament is now closed and it will resume activities on October 14th, coincident with the Queen’s Speech.
In the UK docket, the labor market report surprised to the upside, as Average Hourly Earnings +Bonus expanded 4.0% on a year to July and Claimant Count Change came in at 28.2K, bettering forecasts. In addition, the jobless rate ticked lower to 3.8% (from 3.9%). The auspicious jobs report adds to Monday’s upbeat GDP figures, all morphing into further support for GBP.
What to look for around GBP
Renewed upside momentum is pushing the Sterling to fresh tops in response to recent auspicious data releases in the UK docket (finally). However, the Sterling is forecasted to remain under scrutiny as political effervescence is far from abated… and a Brexit deal looks still ages away from resolving. All eyes are now on the developments from the UK political arena amidst the inactivity in the UK Parliament and with all the looks pointing to mid-October. On another direction, BoE’s Vlieghe ruled out negative interest rates at his speech on Monday and talked down the likeliness of a recession in the country.
EUR/GBP key levels
The cross is retreating 0.06% at 0.8942 and a drop below 0.8904 (monthly low Sep.9) would expose 0.8891(monthly low Jul.25) and then 0.8839 (200-day SMA). On the upside, the next hurdle lines up at 0.9055 (55-day SMA) followed by 0.9073 (21-day SMA) and then 0.9148 (monthly high Sep.3).