EUR / GBP consolidates near day highs above 0.9100

• EUR / GBP is currently trading just below the highs for the day, just above the 0.9100 level.
• However, the pair is still trading at a substantial loss on the day, amid relief that Brexit talks extended beyond the weekend.

He EUR/GBP It has sharply reversed higher from the day’s lows just below 0.9050 and is currently consolidating at the day’s highs just above the 0.9100 level. However, the pair is still trading significantly below last Friday’s close, which was around 0.9160 and therefore still trading with losses of around 0.4% or just over 30 pips on the day.

GBP boosted by Brexit relief

British Prime Minister Boris Johnson and EU Commission Chair Ursula von der Leyen agreed on Sunday that she would be responsible for continuing the talks. Some had feared that in the absence of major progress in the negotiations before Sunday, there was a risk that the two would have called the talks and opted to focus on planning without agreements. Therefore, this immediate risk of a complete breakdown of the talks has been avoided and this has given a boost to the GBP.

However, aside from the fact that both the UK and the EU seem keen to continue the talks until the last minute, there is not much else to be optimistic about. A UK reporter tweeted that “the talks remain difficult and we have not made significant progress in recent days, despite UK efforts to bring energy and ideas to the process,” citing sources.

Therefore, it is perhaps not surprising to see EUR / GBP retrace from lows below 0.9050 given the fact that a deal doesn’t actually appear to be any closer. The British pound could also be hit against the euro by news that London will imminently be placed at the highest level of Covid-19 restrictions in the UK, amid a growing outbreak of a new strain of Covid-19 that, reportedly more virulent than others. .

Still, it’s not like the Eurozone didn’t have its own bad news about Covid-19 on Monday as well; Germany and the Netherlands will go into national lockdowns immediately until January, so perhaps this will level things out as far as EUR / GBP is concerned.

Looking ahead, the main driver of the cross will continue to be Brexit; Markets must now keep an eye on the clock until December 31, after which the UK and the EU will negotiate on WTO terms if they fail to secure some kind of free trade deal. Failure to reach a deal by then will of course be bad for the British pound, but it already appears that both parties could be preparing to continue negotiating on the future relationship beyond this date and simply bear the short-term pain of the economy. breaking off.

The pair is unlikely to pay too much attention to this week’s Tier 1 data releases from both the UK and the EU, although it will be worth paying attention to the UK (November) employment data on Tuesday, the UK CPI (November) and EU and UK. Flash US Markit Manufacturing PMI (December) on Wednesday, followed by UK retail sales data (November) on Friday.