EUR/GBP – Has the correction passed? (video)

Euro stable despite renewed Italian political turmoil

Work is underway in Italy to see if the President can avoid another snap election just ahead of the important budget season. Italy’s finances are a constant cause for concern which makes Salvini’s successful attempt to bring down the government all the more inconvenient, especially as these are never particularly straightforward as last year highlighted.

While Italian stocks and bonds have been sensitive to the all-too-familiar destabilising political landscape, the euro has been relatively unshaken. While domestically this is another negative for Italy, the risks beyond its borders are minor at this moment in time which is why the euro is taking it all in its stride.

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How big a bounce can we expect from GBP?

The pound has enjoyed a bit of a bounce recently, buoyed by the rare period of relative calm on the Brexit front. Naturally it helps that it’s summer so lawmakers are spending less time in the spotlight and more on the beach (didn’t stop Salvini but….) but after the first week of Boris’ tenure, it would have been understandable to expect three solid months of no-deal talk.

I don’t think we’ll get much of a break from it, in fact Boris is in France and Germany this week to convince his counterparts Emmanuel Macron and Angela Merkel to abandon the backstop. Good luck with that. Unless we see any softening in tone from either side, I don’t expect traders to get too excited just yet which may limit any sterling upside.

EURGBP is testing 0.91 support at the moment, a level that for some time had been a major level of resistance. A rebound off this level would draw attention back to 0.93, with a break below equally putting the focus on 0.89. To hear more, watch the video above.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.