- EUR/GBP consolidates Thursday’s losses, rebound fades below 0.8600.
- Optimism over ECB move, covid and Brexit woes in the UK help buyers.
- Eurozone Retail Sales, UK Services PMI can offer immediate direction.
EUR/GBP remains firmer, recently sidelined, around 0.8585, heading into Friday’s London open. The increasing odd of the European Central Bank’s (ECB) reduction in weekly bond purchases joins covid woes in the UK and fears of a tax hike to keep the EUR/GBP buyers hopeful. However, traders await Eurozone Retail Sales for July and second reading of the UK Services PMI for August month for fresh impulse.
The record high of the Eurozone Producer Price Index (PPI) for June, published the previous day, propelled chatters that the ECB needs to recall some of the easy money offered during the pandemic. “An improved economic outlook will allow policymakers to reduce the pace of buying from 80 billion Euros a month in September to about 50 billion Euros in March. A decision to terminate the program then, as currently planned, is only expected at the end of the year,” per economists surveyed by Bloomberg.
On the other hand, UK PM Boris Johnson is up for publishing a tax hike to pay for an overhaul in social care. The likely rise in national insurance will see around 25 million people pay extra tax, per The Telegraph. Furthermore, UK PM Johnson also pushed for fastening vaccine jabs for 16–17 years old, as well as confirmed plans for COVID booster jabs in September, per Sky News. On the same line, the UK covid numbers are on the spike of late with the death toll refreshing multiday high and infections rising past 38K.
It should be noted that the Financial Times (FT) recently came out with the news inciting fears that the UK policymakers are bracing for a strict virus-led lockdown in the future. “The UK government is gearing up for a parliamentary battle to renew ‘draconian’ emergency coronavirus legislation this month in a sign that pandemic restrictions may need to be reintroduced this winter.”
Above all, sluggish market sentiment ahead of the key US jobs report for August grinds the EUR/GBP prices of late. That said, early signals for the headline Nonfarm Payrolls (NFP) backs a downbeat outcome and hence receding odds of the Fed’s tapering, which in turn favors the market’s optimism and further Euro strength.
Amid these plays, S&P 500 Futures rise 0.20% intraday, tracking the Wall Street benchmarks that closed mildly positive on Thursday whereas the US 10-year Treasury yields drop 0.4 basis points (bps) to 1.29% by the press time.
For nearby direction, the Eurozone Retail Sales, expected 4.8% versus 5.0% previous readouts, as well as the UK Services PMI, expected to confirm 55.5 figure, will be important to watch.
Technical analysis
Sustained trading beyond 50-DMA, near 0.8550, backed by a one-week-old ascending support line near 0.8578, keeps USD/CHF buyers hopeful.
