EUR / GBP slides towards 0.9000 as anticipation of Brexit deal grows

• EUR / GBP has fallen towards 0.9000 from 0.9100 amid hopes that a Brexit deal is about to be announced.
• Buyers have kept the pair supported above 0.9000 for now, but confirmation of a Brexit deal could lead to more sales.

Amid reports that the EU and the UK are close to reaching a Brexit deal, the EUR/GBP it has fallen from Wednesday’s opening levels around 0.9100 and has reached daily lows at the 0.9000 level. However, buyers have risen to this level, and the pair has risen to trade at 0.9030, although it is still below 70 pips or almost 0.8% on the day.

Traders appear restless to push EUR / GBP convincingly below their 21 and 50 day moving averages (DMA) at 0.9031 and 0.9010 respectively, as well as the psychologically important 0.9000 level with no official confirmation that a agreement. Note that just below the 0.9000 level is also the pair’s 200 DMA, which is currently trading at 0.8984. Below that, the next notable levels are the psychologically important 0.8900 and the lows of mid-May, early September and mid-November that come into play at 0.8860.

It seems likely that the EUR / GBP could test these levels should a deal be confirmed, although growing concern over the worsening pandemic in the UK could limit further gains from the GBP.

1) A record 39,200 cases were reported on Wednesday and daily deaths rose to 744, just about 250 from April’s daily death count highs.

2) It was confirmed that lockdown restrictions will tighten across most of the country from Boxing Day (Saturday), including many areas after London and the South East to Level 4 (same as the national lockdown in November). Many expect a full national lockdown to be re-implemented in the new year.

3) The rapid increase in cases appears to be driven by the new, more transmissible variant of Covid-19, which is believed to be spreading in schools (so schools could remain closed in January). Meanwhile, two cases of the worrisome new variant first detected and currently spreading in South Africa have been found in the UK. Flights from the country have been stopped and all new arrivals are ordered to isolate themselves immediately.

There has been no official confirmation that a deal has yet been reached, but multiple sources have told numerous UK media outlets that the deal is close. The official comment from EU officials is that “the talks are in the final phase” and Brussels-based sources said EU leaders have started preparations for the provisional application of a new UK trade deal to as of January 1, 2021 (which means that an agreement can be immediately ratified without having to go through the European Parliament, which will confirm the agreement at a later date).

The latest reports suggest that, subject to approval of the deal by EU leaders, a Brexit deal could be finalized as early as 19:00 GMT on Wednesday. UK media believe a confirmation statement will be released. But sources insist that things are not yet 100% at the moment.

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