EUR/GBP week 48

The EU and the UK have entered into a period of intensive Brexit talks. It is still in the best interest of the EU and the UK to try and reach a trade agreement before the deadline at the end of the year. The EURGBP pair should find sellers on rallies higher as expectations of a deal breakthrough grow.

A sudden pickup in the British pound dragged the EUR/GBP cross to near two-week lows, around the 0.8975 region during the first half of the European session.

The cross extended last week’s rejection slide from the key 0.9000 psychological mark and witnessed some follow-through selling for the second consecutive session on Monday. The downfall also marked the fourth day of a negative move in the previous five and was sponsored by the emergence of some strong buying surrounding the sterling.

Despite the lack of progress in Brexit talks, the GBP gained some strong positive traction on the first day of a new week and got an additional boost from stronger-than-expected UK PMI prints. In fact, the UK Manufacturing PMI unexpectedly jumped to 55.2 in November as against consensus estimates pointing to a fall to 50.5 from 53.7 previous.

Conversely, the gauge for services sector drifted back into the contraction territory and came in at 45.8 for the reported month, down from 51.4 previous. The reading, however, was stronger than 42.5 anticipated and provided an additional boost to the pound, though a modest uptick in the shared currency helped limit further losses for the EUR/GBP cross.

The euro benefitted from the prevalent US dollar selling bias and was further supported by upbeat German/Eurozone Manufacturing PMI prints for November. That said, the data still pointed to a fall in business activity amid the introduction of more aggressive measures to curb the second wave of coronavirus infections in the region.

Nevertheless, the EUR/GBP cross has now moved well within the striking distance of the 0.8860 region, or monthly lows, below which the downward trajectory could further get extended towards testing the 0.8800 round-figure mark.

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