EUR / GBP rises back towards 200 DMA at 0.8580 amid moderate trading conditions

Amid the lack of significant new fundamental catalysts on Thursday, in addition to a slightly softer-than-expected UK GDP report, the EUR/GBP it has continued to rise while still respecting the weekly ranges. The cross appears poised to post a third consecutive daily gain of around 0.1%, during which time it has risen from the weekly lows recorded Tuesday at around 0.8520 to current levels just below 0.8570. That still leaves the pair slightly below the recent highs of the beginning of the week or the end of last week around 0.8590. The 200 day moving average at 0.8580 appears to offer some resistance, just as the 50 DMA (just above 0.8520) earlier in the week provided the foundation for a bounce.

Brexit update

British Prime Minister Boris Johnson will travel to Paris on Friday to meet with French President Emmanuel Macron, where access to fishing for French vessels in UK waters will likely be at the top of the agenda. The UK’s broader disagreement with the EU over the implementation of the Northern Ireland protocol will also be a major topic of discussion. Political analysts still believe that there is a high probability that the UK will activate Article 16 to unilaterally override parts of the protocol, which could trigger a broader trade / legal conflict with the EU. But there were reports that the EU was prepared to improve its offer on controls on goods entering and leaving Northern Ireland, an offer that could be presented to the UK prime minister on Friday.

For now, currency markets are ignoring Brexit risk. ING’s fair value model for EUR / GBP shows that the pair only trades with a ‘Brexit’ risk premium of about 1.0%, up from over 5.0% at some points during 2019. “With the UK CPI United heading into the 5% area in April, we are happy with a year-end EUR / GBP target close to 0.8500, and lower levels as 2022 progresses, ”the bank says.