- EUR / GBP is falling on Wednesday, ending a three-day streak of gains.
- Improvement in stocks helped the British currency.
- Brexit issues and COVID-19 nervousness could limit the pound’s recovery.
The EUR / GBP fell almost 40 pips from the high of the day and is trading at 0.8621, the minimum of the day. The cross approached the important support at 0.8620 after failing to affirm above 0.8650.
The An improvement in the mood of the equity markets, coupled with a slight pullback in the dollar in the market, took strength from the EUR / GBP. This drop may be cushioned amid disagreements over the Northern Ireland Protocol. British Prime Minister Boris Johnson told parliament on Wednesday that there are practical steps to resolve the problems. UK chief Brexit negotiator David Frost said they want a new balance with the European Union.
This, coupled with the resurgence of COVID-19 infections in the UK, could continue to act as a headwind for the British pound and help limit any deeper EUR / GBP losses. Furthermore, there is still a certain climate of caution in equity markets after Monday’s sharp decline.
A key event to keep in mind is that Thursday will be the meeting of the European Central Bank, which can have a strong impact on the euro. Traders are positioning themselves in the face of possible developments from the central bank.