Today our focus will remain on Europe as we take a look at the EUR/GBP currency pair. The uncertainty surrounding Brexit is affecting the pair significantly and we see a weakness in the pound returning.
The British pound is still under pressure due to Brexit, arguably the biggest political crisis in the UK in the 21st century. This week we learned that Prime Minister Boris Johnson intends to suspend Parliament for over four weeks, allowing them to return to work only on October 14. That gives Parliament just two business weeks to do something to prevent a hard Brexit. Johnson plans to execute this move by postponing the Queen’s Speech, which he is in charge of scheduling, all the way to the middle of October, essentially extending MPs scheduled summer break. The opposition is trying to come up with a plan to vote the PM out of his office, but if Parliament is officially disbanded, they cannot act on it.
Meanwhile, a week has already passed since Angela Merkel gave Johnson a 30-day deadline to come up with a plan. At this point, it seems that Johnson just wants the United Kingdom to default to a hard Brexit on October 31 and then hold elections and possibly shift responsibility for the impending financial crisis to someone else. As a result, the British pound is weakening against all major currencies.
At the time, the euro is also struggling to catch a breather. Europe is slightly less affected by the US-China trade conflict and was able to stabilize recently. However, it still remains vulnerable to weak economic reports. Today’s German unemployment change report was worse than expected, which is not a good sign. Later today Consumer Price Indices from both Germany and the whole eurozone will be published. Those are of high importance as they’ll show if inflation is stagnant or growing, which will in turn influence the ECB’s policy.
In terms of the daily chart, today we have a pivot point for the pair located at 0.9073, with the pair currently trading above it. The daily support levels lie at 0.9024 and 0.8975. The daily resistances are at 0.9122 and 0.9171. The indicators of technical analysis suggest a strong sell in the daily term.
