GBP/EUR & EUR/GBP Update

Good afternoon everyone,

 

As most of you have seen over the last few months I’ve continued to mention that we are always one comment away from the GBP/EUR exchange rate spiking higher or lower. Surprisingly this came from the EU’s Chief negotiator Michele Barnier late Wednesday afternoon. He said the EU is ready to offer an unprecedented partnership with the UK, however, UK PM May’s deputy, David Lidington, said that EU was necessary to avoid a ‘no deal’. Still the market took Barnier’s comments as a sign that a deal can yet be reached. The GBP/EUR exchange rate opened Wednesday morning around €1.0998 and by close of business it was around the €1.1130 mark.

 

A report in the Times says French President Emmanuel Macron "is preparing to throw Theresa May a lifeline by pushing other EU leaders to agree a close relationship with Britain after Brexit as part of his vision for a united Europe." Macron is reportedly set to use a summit in Austria next month to spell out a new structure for European alliances. It would be based on “concentric circles”, with the EU and the Euro at its core and Britain in a second ring.

 

Looking ahead to next week and economic data for will be back in focus for the UK with Construction, Manufacturing and Services Data for August due for release. Once the GBP/EUR rate stays above €1.11 it will then be nicely poised to make another push towards €1.1190, however we need to see some impressive data releases from those 3 sectors especially the Services Sector for this to happen. More on that in Monday’s report.

GBP/EUR  &  EUR/GBP Movements

Barnier’s recent comments looked like they could be the catalyst for the rate to move back towards the €1.12’s however the GBP/EUR rate has found strong resistance around the €1.1150’s with the next key resistance level at €1.1190. The GBP/EUR rate did make a valiant effort to push towards €1.1190 yesterday afternoon but could only push to €1.1168 before falling back and closing around €1.1130’s.

Current key trading level is now on the higher end of €1.1190 (If we see the rate move higher than this level for a sustained amount of time, then the likelihood of the rate moving towards the €1.1230’s will be quite high). Traders are suggesting that the rate will find some strong resistance to push higher than €1.1190 until we get more substantial news on Brexit. As mentioned before we could have another press conference later this afternoon.

Key Economic Data and Events

Friday, 31st August, 2018

07:00 EU - German retail sales

10:00 EU - Unemployment & CPI

11:00 EU - Italian GDP

Red = Major market effect, Orange = Medium market effect & Green = little market effect.

GBP/EUR Daily Performance

  • High of the day so far is €1.1158
  • Low of the day so far is €1.1125
  • Resistance at €1.1170’s/90’s
  • Support at €1.11’s
  • Range €1.1080’s - €1.1230’s
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