EUR/GBP weaker, drops to 2020 lows near 0.8440

• EUR/GBP loses further ground to the 0.8440 area.
• GBP-strength drags the cross to multi-day lows.
• UK’s CBI surveys surpassed expectations in January.

The better mood in the sterling is now forcing EUR/GBP to shed further ground and extend further the recent breakdown of the 0.8500 mark.

EUR/GBP offered post-UK data

The European cross has come under renewed and heavy downside pressure in the past couple of sessions, breaking below the key support at 0.8500 the figure and accelerating the leg down to the proximity of YTD lows in the 0.8460/50 band.

The improved sentiment in the quid is sponsoring the decline in the cross, particularly in response to better-than-expected CBI results earlier today. In fact, the CBI Industrial Trends Orders came in at -22 for the current month, surpassing estimates and up from December’s -28. In addition, the CBI Business Optimism bettered to multi-year highs at 23 for the same period. The results show some renewed optimism in the sector and seem to have cooled down speculations of a rate cut by the BoE in the near term somewhat.

On another front, US Treasury Secretary S.Mnuchin said a US-UK trade deal is a priority this year, while Chancellor Javid expressed his optimism that an agreement with the EU could come before year-end.

What to look for around GBP

The British pound is extending its upbeat momentum in response to better-than-expected results from the CBI indicators and the recently published labour market report. In the meantime, investors’ attention remains on the upcoming Brexit deadline (January 31^st) and the subsequent key trade negotiations with the European Union. However, rising speculations of a probable rate cut by the BoE in the near-term carry the potential to undermine further gains in the quid.

EUR/GBP key levels

The cross is losing 0.53% at 0.8446 and a breakdown of 0.8392 (low Dec.9 2019) would expose 0.8275 (2019 low Dec.13) and then 0.8248 (monthly low July 2016). On the other hand, the next up barrier lines up at 0.8518 (55-day SMA) seconded by 0.8595 (2020 high Jan.14) and finally 0.8646 (100-day SMA).