- EUR / GBP continues its recent bearish trajectory and falls to lows of more than two months.
- Upbeat signals from the BoE and abatement of fears of a new Brexit-related dispute benefit the British pound.
- A weaker USD benefits the common currency and could offer some support to EUR / GBP.
The EUR/GBP has extended its steady intraday decline and has fallen to lows of more than two months, around the 0.8450 region during the first half of the European session on Thursday.
The cross has struggled to capitalize on its modest intra-day rally and has encountered new selling below the key psychological level of 0.8500 and now appears vulnerable to extending the decline. The relative performance of the British pound occurs amid positive developments around Northern Ireland’s protocol to the Brexit deal.
A team of negotiators from The EU on Wednesday delivered a plan offering to cut customs checks and paperwork on British goods destined for Northern Ireland. to avoid a new post-Brexit dispute. The UK said it would consider the proposals seriously and constructively and urged both sides to enter into intensive talks quickly.
Apart of this, optimistic signals from Bank of England officials (BoE), including Governor Andrew Bailey, have also acted as a tailwind for the British pound. In fact, the money market seems to have now fully valued in a 25bps rate hike from the BoE in December, which is seen as another factor that puts pressure on the EUR / GBP cross.
On the other hand, the common currency has benefited from the current decline in the US dollar from 13-year highs. This, however, has done little to impress the pair’s bulls, although it could help limit any further losses for the EUR / GBP cross. However, the fundamental backdrop favors the bears and supports the prospects for further losses.
EUR / GBP technical levels