EUR/GBP tests the 21-day SMA near 0.8480 on GBP-selling

• EUR/GBP moves to 2-day highs in the 0.8480 area.
• GBP-selling is fuelling the move up in the cross.
• PM Johnson said the UK does not need to follow EU rules.

The now increasing offered bias around the sterling is lifting EUR/GBP to the area of 2-day highs in the 0.8475/80 band.

EUR/GBP looks to trade negotiations

The quid is coming under renewed and moderate downside pressure at the beginning of the week after speeches by UK’s PM B.Johnson and EU’s M.Barnier unveiled a significant gap between both countries’ intentions to clinch a trade deal.

Indeed, the main focus of the trade discussions appears to be around level playing field provisions and fishing. PM Johnson stressed that in order to reach a trade agreement, the UK should not be forced to accept Brussels’ rules.

In the docket, both German and the EMU final manufacturing PMI for the month of January came in above the preliminary readings at 45.3 and 47.9 respectively; while the manufacturing gauge in the UK rose to 50.0.

What to look for around GBP

The British pound is losing part of last week’s shine on Monday on the back of initial frictions regarding a UK-EU trade deal. The continuation of the effervescence in the trade front between the UK and the EU are seen as a key driver for the currency in the month to come, while consensus among investors on a final deal by year-end remains pretty divided. On another front, GBP managed to regain traction after the BoE left its monetary status unchanged last week, despite an interest rate cut in the near-term stays well on the investors’ radar.

EUR/GBP key levels

The cross is gaining 0.87% at 0.8474 and faces the next resistance at 0.8487 (weekly high Jan.30) seconded by 0.8496 (55-day SMA) and finally 0.8595 (2020 high Jan.14). On the downside, a breach of 0.8385 (2020 low Jan.24) would expose 0.8275 (2019 low Dec.13) and then 0.8248 (monthly low July 2016).