The GBP has been low against EUR in the last 6 months, which can be fair enough for a short, quick trade. Moreover, a profit-hungry market is likely to see bounces as an opportunity to reload bets against the currency.
It looks like traders don’t have clarity about the future of Brexit, especially after Boris Johnson hasn’t offered new insights on the mater. Johnson, who is perceived as the next UK PM, sees “No Deal” as an undesired outcome. Therefore, he may likely take the UK out of the EU in October, if the deal isn’t reached.
Johnson’s priority is renegotiating the existing Brexit deal, rather than pursuing a “No Deal” Brexit.
We think that “No Deal” tends to have a negative influence on GBP, and what will be important in coming weeks are the details of how the next PM intends to handle the Brexit deal.
Sell-off in GBP looks overdone
How high the EUR/GBP can go in short-term is questionable. However, we think that the current sell-off in GBP looks overdone for the time being.
What is currently good for these “reversal” levels of EUR/GBP is the pressure over EUR after ECB`s President Draghi (Super) Mario has commented publicly and his major dovish shift. On top of that, ECB`s VP has stated today that ECB may introduce a new bond-buying program if that is needed for further economic stimulus.
GBP will remain fixated on political developments over the coming days and weeks, as well as, on the Bank of England, which dominates in the near-term outlook for Pound.
BOE policy meeting is scheduled for today.
Source, Charts by MT5