GBP: EURGBP Narrows Gap To 0.8746 Resistance
Feb-09 11:15
- Relative GBP underperformance at the beginning of the week highlights ongoing market caution around political uncertainty surrounding PM Starmer and the BOE outlook also leaning dovish. Sterling price action is in fitting with several analysts raising their conviction on GBP shorts last week, with many expressing this opinion via long EURGBP recommendations.
- Given the broader dollar weakness, EURGBP price action is noteworthy today, with the cross briefly rising above last week's 0.8721 highs. Key short-term resistance to monitor is 0.8746, the Jan 21 high, where a break would signal a potential trend reversal to the upside.
- In domestic politics, Starmer’s future is increasingly in doubt, with prediction market-implied odds raising to 60% for a departure by June 30. This comes after reports have suggested Starmer may look to appoint MPs from the left of the party to his cabinet to appease those who are arguing for him to step aside, following his involvement with former ambassador Mandelson. Market caution has two legs here as the fiscal angle adds to political instability.
- BoE-dated OIS is still pricing roughly 2/3 odds of a cut at the Bank’s March meeting, with MPC member Mann (who seems closer to voting for a cut then she was previously) due to speak at 19:30 GMT today. Note that she will speak on ‘the dollar and continued US exceptionalism’, so we may not get much on UK monetary policy. On the data calendar, preliminary Q4 GDP is due on Thursday.
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