Listen to the latest market mood for the EURGBP pair.

Strong EUR, Weak GBP

The European Recovery Fund has been taken by the market as a very positive sign of European solidarity. As a result, the chances of the eurozone breaking up are now reduced as the nations pull together to support the economy via the fund. There is a strong call option skew on heavy EURUSD options, so more EUR strength is anticipated by the market.

The UK is still struggling with Brexit negotiations. According to Gov’t sources, there has been neither ‘breakdown nor breakthrough’ on major sticking points and talks are at an admitted impasse. EU is
expected to warn that are only a few weeks left to arrange a Brexit deal that is legally operational by year-end after the latest round of talks. The EU had penciled in a summit of EU leaders for October 15 to approve any agreement, with the possibility to move it later in the month if needed. However, they warned that further delays would jeopardise the ratification process ahead of a vote in the European Parliament in December.

As a result, expect EURGBP buyers at market and buying on stops at 0.9142.

Swing trade outlook – We expect this trade to play out over the next 3-5 days.

Trade Risks:

• If there is a positive breakthrough in Brexit negotiations that will invalidate this outlook.
• If Europe’s COVID-19 case count starts to rise rapidly this will also invalidate this outlook.