EURGBP: Sterling Under Pressure From Brexit and Rate Talk

EURGBP was higher for a third day as the Pound continues to be weighed down by a collection of gloomy outlooks. Sterling started to slide after Boris Johnson raised the prospect of a No-Deal Brexit two weeks ago with a threat to pull out of trade talks if no agreement was made by the October deadline. The Brexit situation continues to boost the Euro but there was also talk last week of negative rates coming to the U.K. whilst the country also faces a potential second lockdown due to rising virus cases.

The MPC left rates unchanged at a record-low of 0.1% on Thursday and maintained its outlook for the UK economy. Investors focused on the meeting minutes, which showed discussions had happened over the potential for a negative interest rate policy. Many European countries continue to hold rates at zero, whilst Sweden and Switzerland are among those with negative rates.

The discussion on negative rates was a shock to markets that didn’t expect to see the bank move on the strategy so early.   The MPC minutes said that the committee “discussed its policy toolkit and the effectiveness of negative policy rates in particular.” They also said there will be formal talks on the operational aspects of the policy by the end of this year.

The threat of a No-Deal Brexit still looms over the U.K. economy and the bank will be looking to take emergency measures if the economy suffers another shock. The rise in virus cases was also unwelcome with the U.K.s Chief Medical Officer calling it a “critical” moment for the country.

EURGBP Technical Outlook

The key level in EURGBP is at the 0.9170 high from June 29th. This level will provide support and resistance for the days ahead. A close below could lead to the pair trading back in the range where support is at 0.9070 and below. The highs near 0.9300 are resistance for the pair. The Investing Cube team is available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.   

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EURGBP Daily Chart

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