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.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam