- EUR / GBP has bounced from multi-month lows below the 0.8540 level in recent trading, but continues to trade with a negative bias.
- The EU and the UK have just agreed a memorandum of understanding on financial services in a positive sign for future trade cooperation.
The EUR/GBP It has bounced from multi-month lows below the 0.8540 level in recent trading and is now trading back above 0.8550, but continues to trade with modest losses of about 0.1% or up around 10 pips on the session. The pair has stalled within a range of roughly 0.8540-0.8640 for the past three weeks and there is a growing sense that at some point something has to give.
Given that the EUR / GBP is currently testing the lower bounds of its recent range, any breakout seems likely to be to the downside. If the support at 0.8540 goes, the next notable support zone is around the psychologically important level of 0.8500 (which also coincides with the highs of February 10, 2020). So there would be clean air up to 0.8300.
Performance of the day
UK retail sales data for the month of February contained no surprises on Friday morning and as such the British pound barely moved at the time. As expected, sales rose modestly in the month after the big drop in January. Retail sales remain subdued given the ongoing lockdown, but are expected to get a boost from mid-April, when nonessential retail stores are allowed to reopen.
EUR / GBP continues to trade near multi-month lows as the outlook for the pandemic continues to worsen in the euro zone, but improves in the UK; Comments from European leaders on the bloc’s entry into a third wave of the pandemic remain pessimistic. Most disturbingly, the German RKI leader said there are clear signs that the current wave could be worse than the first, while the German health minister warns that the health system could reach capacity in April. Another health official said there is a risk that new daily infections will reach 100,000.
Meanwhile, the launch of the vaccine continues to perform well in the UK and rates of infection, hospitalization and death from Covid-19 continue to decline steadily, helping the GBP remain bullish against most of its peers. of the G10. Recent news about the signing of a memorandum of understanding by the EU and the UK on financial services has also given sterling a minor boost.
UK and EU agree memorandum of understanding on financial services
The EU and the UK have agreed on a new Memorandum of Understanding (MoU) on financial services, the first major step taken by the two sides towards post-Brexit cooperation in financial services. London financial firms will hope the move brings closer a deal on financial services equivalence (which could give UK financial firms access to the EU single market). The recently agreed MOU establishes a framework for regulatory cooperation, creates a forum to discuss new rules, and shares information.
Technical levels
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