- The pound started with rises, due to a better mood in the markets.
- Political crisis in Italy and ongoing UK succession.
- ECB and UK labor market data ahead.
The EUR/GBP is sliding lower on Monday, having hit a one-week high above 0.8500 on Friday. The cross is trading at daily lows at 0.8465, moving with a bearish intraday bias, and about to return below an important technical level.
Days are coming that can be moved for the EUR/BP considering the unfolding events in both the UK and the Eurozone. This will be key to see if EUR/GBP continues to bounce back or resumes lows.
On the technical side, a firm return above 0.8550 will leave the euro strong and with the possibility of a return above 0.8600. In the opposite direction, a close below 0.8430 would be a sign of more downside ahead, initially to test 0.8400.
Multiple fronts, multiple risks
In the Eurozone, the week begins with two important unknowns. On the one hand there is the political crisis in Italy, which should have news for Wednesday. This has been boosting Italian bond yields. The other factor of uncertainty is whether Russia will send gas again after the closure for a maintenance operation on the network that goes to Germany.
This week there is also the decision European Central Bank. A rise of 25 basis points is discounted and details of the “anti-fragmentation instrument” to be announced by the central bank are expected, to avoid a large spread, between, for example, Italian and German bonds.
In the United Kingdom, the situation is also complex. There’s the race to succeed Boris Johnson as leader of the Conservative Party and as Prime Minister. One of the candidates, Liz Truss, said on Monday that she would impose limits on the independence of the Bank of England.
Tuesday in the United Kingdom Labor market and inflation data will be published on Wednesday, closing the week with the report of retail sales and the PMI on Friday.
The next meeting of Bank of England It’s August 4. According to market prices, a rise of 50 basis points is expected, the same as in the following meetings.
Technical levels
Source: Fx Street
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