EUR/GBP jumps to 0.8570-75 region, fresh session tops on upbeat German PMIs
- EUR/GBP regained positive traction on Friday and recovered a part of the overnight heavy losses.
- Brexit woes, COVID-19 jitters, mixed UK Retail Sales undermine the GBP and remained supportive.
- Upbeat flash German PMI prints benefitted the euro and provided an additional boost to the cross.
The intraday selling bias around the sterling picked up in the last hour and pushed the EUR/GBP cross to fresh daily tops, around the 0.8570-75 region.
The cross caught some aggressive bids on the last trading day of the week and snapped two consecutive days of the losing streak, stalling this week's sharp pullback from near two-month tops. The British pound's relative underperformance comes amid rising COVID-19 infections in the UK and the impasse over the Northern Ireland Protocol of the Brexit deal.
It is worth reporting that new cases in the UK have been rising by more than 50,000 a day. Adding to this, the EU rejected the UK’s demand for a new approach to the Northern Ireland Protocol. The combination of factors continued acting as a headwind for the sterling and assisted the EUR/GBP cross to regain some strong positive traction on Friday.
On the economic data front, the headline UK Retail Sales recorded slightly better-than-expected growth of 0.5% in June. The positive reading, however, was offset by softer core sales figures, which increased by a modest 0.3% during the reported month and did little to provide any meaningful impetus or impress the GBP bulls.
On the other hand, the shared currency remained on the defensive in the wake of the ECB's shift towards more dovishness on Thursday. The central bank revised its forward guidance and signalled that it is likely to maintain a highly accommodative policy for a very long time. That said, better-than-expected flash German PMI prints extended some support.
Report from IHS/Markit research showed that the German Manufacturing PMI rose to 65.6 in July and pointed to an extension of the expansionary mode. Moreover, the gauge for the services sector activity came in at 62.2 for the reported month as against 59.1 estimated. This marked a notable increase from 57.5 in the previous month and the highest level since June 1997.
Market participants now look forward to the flash UK Manufacturing/Services PMI prints. Apart from this, any incoming Brexit-related headlines and developments surrounding the coronavirus saga will influence the sterling. This, in turn, should provide some impetus to the EUR/GBP cross and allow traders to grab some short-term opportunities.
Technical levels to watch