Plenty To Assess

EUR/GBP has once again failed to sustain a break below GBP0.8400, with the rate printing as low as GBP0.8383 on Thursday. Could it be that rate differentials have provided as much downward pressure as they could in isolation? Especially with the "unreliable boyfriend" moniker creeping back in on Threadneedle Street. While Europe is dealing with deeper COVID restrictions and an unwind of the seemingly overly hawkish bets re: ECB rate hikes (aided by the latest round of guidance from Madame Lagarde), the UK has seen Brexit uncertainty re-emerge in recent weeks, with questions already swirling re: the demand side of the British economy in '21 owing to tighter fiscal pursestrings and inflationary pressures. Perhaps more clarity is required on these UK-centric fronts to open the way for a notable move lower in the cross (all other things equal), if such a move is to be forthcoming.

• Spot last deals just above GBP0.8410, ultimately little changed on the day. Our technical analyst highlights a more encouraging picture for GBP bulls, with the cross remaining in a downtrend. The recent key technical break has been the move though support in the form of the Oct 26 low (GBP0.8403). The break reinforces bearish conditions and confirms a resumption of the broader downtrend. This has opened the way to the Feb 26 '20 low (GBP0.8356). Note too that the cross is approaching the base - at GBP0.8300 - of a broad multi-year range. Initial resistance is seen at the Nov 3 low (GBP0.8463).
• UK retail sales data, an address from BoE chief 4conomist Pill and ECB speak from Lagarde & Weidmann provide the relevant highlights for the cross ahead of the weekend.