EUR/GBP: keeping an eye on 2016-17 resistance line at 0.8573 and UK politics around Brexit

EUR/GBP is trading at 0.8401, down -0.04% on the day, having posted a daily high at 0.8420 and low at 0.8384.

EUR/GBP attempting a minor recovery back onto the 0.84 handle in the highly bearish territory while sterling bulls commit to the pound on the 1.29 handle still with a target of the psychological 1.30 level. 

The political environment in euroland has improved in terms of the status quo with the Macron victory, who incidentally will be handed presidential powers by Hollande on Sunday, but now the focus turns back to the UK parliament and Brexit. 

Focus on UK snap elections, 8th June

While the UK economy has proven resilient amidst all of the uncertainty around Brexit, May recently called for a snap election to sure up Brexit negotiation-powers trying to get Westminster fully behind her. This has exposed the pound again to further uncertainty and has opened a new chapter for sterling traders. The pound has been stronger due to this being a route map for a soft Brexit as a market and economic friendly divorce from the continent. This was a calculated gamble by prime minister May to beef up her Commons majority and neutralise the extreme Eurosceptics in her party.

However, the pound is not out of the woods yet, and of course, it will mostly all depend on the outcome of these elections. What if they do not go in the way May had intended? After all, we are already familiar with such unexpected outcomes as Cameron's referendum on the EU. What if the Tories end up being a more hardline Brexit party in the Commons by losing moderate MPs to the Liberal Democrats in the South and/or losing seats to Labour in Eurosceptic constituencies in the North? Hence, sterling could be in for yet another rough ride over the forthcoming weeks and months ahead. The snap elections are scheduled for the 8th June and EUR/GBP will be a lively performance. An eye is to be kept on the 2016-17 resistance line at 0.8573.

EUR/GBP levels

Analysts at Commerzbank explained that their near-term outlook for EUR/GBP is negative while the price remains below the 55- and 200-day moving averages at .8550/97. This is a resistance which is reinforced by the seven-month resistance line at 0.8573, they explained. "It is coming under downside pressure and while this caps, a retest of key support at 0.8334/04 is expected. If slipped through, the 0.8252 the July 2016 low would be in focus."

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