- EUR / GBP gained strong positive traction for the second consecutive session on Friday.
- The rising risk of a no-deal Brexit weighed on the British pound and continued to act supportively.
- Expectations of further rate cuts from the Bank of England further exacerbated the downward pressure within the day.
The crossing EUR/GBP it maintained its strong bid tone during the European mid-session and rose to the highest level since September 23 in the last hour. The cross now appears to have cleared a resistance marked by a multi-month downtrend line, with the bulls looking to take advantage of momentum above 0.9200.
The cross added to the previous day’s post-ECB bullish move and gained strong follow-up traction for the second consecutive session on Friday. The British pound remained under intense selling pressure amid growing fears of a no-deal Brexit, which, in turn, was seen as one of the key factors pushing the EUR / GBP higher.
British Prime Minister Boris Johnson said Thursday that there was a strong possibility that a deal would not be finalized. Furthermore, European Commission President Ursula von der Leyen told EU leaders during an EU summit in Brussels on Friday that she has little expectation of reaching a deal with the UK.
Aside from this, the increased bets for a further interest rate cut by the Bank of England (BoE) appears to have further compounded the downward pressure surrounding the British pound. In fact, money markets are valuing with a 65% probability of a 10 bp reduction in rates for March 2021, up from 16% at the beginning of the month.
With sterling price dynamics proving to be an exclusive factor, the strong intraday momentum did not appear to be affected by a modest pullback in the EUR / USD pair. However, a move above the downtrend line resistance could have already set the stage for an extension of the ongoing bullish trajectory for the EUR / GBP cross.
However, bull traders could choose to lighten their bets amid overbought conditions on intraday charts and prefer to wait for the outcome of post-Brexit trade talks. Negotiators still have until the end of the week to reach a compromise agreement.
Technical levels
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