The pound teased after Theresa May delayed the Brexit vote in Parliament. The Brexit uncertainty has been the driving force on GBP and will continue the same over the next few months as 29th March is the Brexit deadline.
The pound fell more than 1.5% overnight before a retracement saw. Finally, the euro cross closes above 0.90 levels for the first time since mid-August.
Data wise, UK economy slows in 3months to October according to Office for National Statistics, GDP monthly estimate.
UK gross domestic product (GDP) grew by 0.4% in the three months to October 2018 vs. 0.6% in Q3.
Commenting on the latest GDP figures head of National Accounts Rob Kent-Smith said
“GDP growth slowed going into the autumn after a strong summer, with a softening in services sector growth mainly due to a fall in car sales. This was offset by a strong showing from IT and accountancy.
“Manufacturing saw no growth at all in the latest three months, mainly due to a decline in the often-erratic pharmaceutical industry. Construction, while slowing slightly, continued its recent solid performance with growth in housebuilding and infrastructure.”
We are in a crucial week with Brexit headlines + data risk. Looking further, the removal of Brexit uncertainty could pose a significant upside risk on GBP, until EURGBP enjoys the upswing.
As we have forecasted before, EURGBP ran through the target which we set last two weeks. Over the past four months, which is relatively a medium-term we saw a range trading between 0.9100-0.8620.
Now the erosion of the 0.9085-0.9100 thresholds is highly encouraging with the bullish daily indicators. A break of these last barriers would be needed to initiate a more pronounced recovery to 0.9140 its 61.8% fib reaction. In our view, the resistance bar has moved from 0.8940/0.8970 to 0.9100/0.9140.
We would be concerned if EURGBP could not push and close above 0.9140 over next week or two. That said, an inability for the euro cross to sustain a stronger tone against the 61.8% fib reaction could end up to be lower. The flip side, 0.9260 and 0.9300 are the next destinations.
Support at 0.9000, 0.8930 and 0.8810.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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