- EUR / GBP is witnessing strong selling for the second day in a row on Monday.
- The British pound receives a strong boost following the release of the optimistic UK PMI.
- A modest rally in the common currency could help limit losses, at least for now.
A sudden rally in the British pound has dragged the EUR / GBP cross to almost two-week lows, around the 0.8975 region, during the first half of the European session on Monday.
The cross has extended last week’s rejection drop, from the key psychological level of 0.9000, and was has been some sales for the second day in a row Monday. The drop also marks the fourth day of negative movement in the previous five and it is due to the appearance of some strong buying around the British pound.
Despite the lack of progress in the Brexit talks, sterling has gained strong positive traction on the first day of a new week and has received an additional boost following the release of the stronger than expected UK PMI. In fact, the UK manufacturing PMI unexpectedly jumped to 55.2 points in November compared to estimates that pointed to a drop to 50.5 from 53.7 the previous month.
On the contrary, the indicator for the services sector fell back to the territory of contraction and stood at 45.8 for the reported month, below the previous 51.4. However, the reading was stronger than expected of 42.5 and has provided an additional boost to the pound, although a modest rally in the common currency has helped limit further losses for the EUR / GBP cross.
The euro has benefited from the prevailing selling bias around the US dollar and has seen supported by upbeat German and euro zone manufacturing PMI figures for November. That said, the data still points to a drop in business activity amid the introduction of more aggressive measures to curb the second wave of coronavirus in the region.
However, the EUR / GBP cross has now approached the 0.8860 region, at monthly lows. Below this level, the downward movement could extend further to target testing the round 0.8800 level.
EUR / GBP technical levels
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