EUR/GBP recedes from 2019 highs above 0.9200

• EUR/GBP moved to fresh tops in the 0.9250 region.
• GBP looks volatile on rumours of EU-UK dialog.
• Irish backstop remains in the limelight.

After recording fresh 2019 highs in the 0.9250 region, EUR/GBP met a fresh bout of selling pressure and has returned to the 0.9200 neighbourhood.

EUR/GBP off highs on GBP-buying

The European cross faded the earlier spike beyond 0.92 the figure in response to the pick up in the demand for the Sterling, all on the back of rumours of the potential resumption of Brexit talks between London and Brussels.

However, this idea was ultimately rejected by the UK government, which insists on a renegotiated (new?) EU-UK deal, one that excludes the Irish backstop, an option that the EU already said is unacceptable. In the meantime, bets on the likeliness of a ‘no deal’ scenario on October 31 continue to rise and are expected to keep weighing on the currency in the next months.

In the calendar, German Factory Orders surprised to the upside during June, expanding at a monthly 2.5%. in the UK calendar, the next release of note will be Friday’s flash GDP figures for the second quarter.

What to look for around GBP

The price action around the Sterling appears consolidative below the 1.22 handle for the time being, showing the lack of a clear bias among investors although this does not mean that fears over a ‘no deal’ outcome were dissipated. In the meantime, the Irish backstop remains the exclusive obstacle for the resumption of talks between the UK and the EU. Back to the UK economy, the positive print from the Services PMI today did nothing to allay concerns over the broad-based poor performance from key fundamentals in the last months, keeping the sour prospect for the economy unchanged in the months to come and collaborate further with the bearish view on the currency. At last week’s BoE event, the central bank kept the monetary conditions unchanged, although it refuses to factor in a ‘no deal’ scenario in its projections. The BoE still sees a ‘soft Brexit’ outcome and reiterated that rates are seen increasing gradually in order to bring inflation to the bank’s target.

EUR/GBP key levels

The cross is losing 0.35% at 0.9193 and a drop below 0.9088 (low Jul.31) would pave the way for a test of 0.9051 (high Jul.17) and then 0.9039 (21-day SMA). On the other hand, immediate hurdle aligns at 0.9249 (2019 high Aug.6) followed by 0.9306 (2018 high Aug.29) and finally 0.9411 (monthly high October 2009).