Among euro crosses, EURGBP halted gains after rising more than 4% from April lows. EU Summit and Bank of England policy meeting this Friday are the key drivers to the cross. The erosion of the 0.9050 thresholds is highly encouraging, and the daily oscillator is bullish.

UK Prime Minister Boris Johnson met the President of the European Council Charles Michel, the President of the European Commission, Ursula von der Leyen, and the President of the European Parliament, David Sassoli, on 15 June by videoconference. The Parties noted the UK’s decision not to request an extension to the transition period. The transition period will, therefore, end on 31 December 2020, in line with the provisions of the Withdrawal Agreement, according to the official press statement.

Recovery divergence: Some G10 economies appear to be rebounding faster than in other countries. Among the G10 economy’s recovery clearly, the UK is a laggard, according to Westpac report.

  • Westpac economist Richard Franulovich said the UK is a clear laggard, with Google’s data showing that as of early June, the UK has seen only a modest decline in “at home” location reporting and the least improvement in transit, retail and recreation, and workplace location reporting. Canada also appears to be a recovery laggard on most of these same metrics, albeit not as weak as the UK.

The divergence between the EA and UK suggest EURGBP has more headroom left. And the Brexit deadline looming on 1 July is another factor that could add fire to the EURGBP upside momentum.

BOE (Bank of England): The Monetary Policy Committee meets this Thursday (18 June). Most expect the Bank of England will upscale its asset purchase target. Recall May MPC meeting, MPC voted unanimously to maintain Bank Rate at 0.1%. The Committee voted by a majority of 7-2 for the Bank of England to continue with the program of £200 billion of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, to take the total stock of these purchases to £645 billion.

  • Danske Bank: We do not expect major policy changes, although the BoE may expand its QE program by another GBP100bn.

Data review: UK GDP recorded the biggest monthly fall since 1997.

GDP fell by 20.4% in April 2020, following a fall of 5.8% in the previous month. April’s GDP fall is the biggest the UK has ever seen. All areas of the economy were hit, Manufacturing and constriction saw significant falls.

  • Mark Gregory, EY UK’s chief economist, said: “This is an undoubtedly challenging environment for businesses and forecasting is extremely difficult. We’ve made some significant adjustments to our GDP expectations compared to what the data told us just six weeks ago,” The Guardian reported.

Data preview: We will see the April ILO unemployment rate (Tue), May CPI (Wed), BoE policy decision (Thu), and May retail sales (Fri). We expect BoE to hold the rates at 0.10% and expand the QE program to GBP 100bln.

We suspect we could see a more sizeable – perhaps £150bn – expansion, allowing purchases to continue until early October, ING Bank in a note.


The erosion of the 0.9050 thresholds is highly encouraging, and the daily oscillator is bullish. Besides, the pickup of the weekly oscillator also underlines further upside potential.

The EURGBP sounds finally ready to test the resistance at 0.9050. A break of this last barrier would be needed to initiate a more pronounced recovery to 0.9300.

The supports are at 0.8860 and 0.8670.

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