The EUR still has some continued reasons for weakness against the GBP. However, since last week’s heavy falls a retracement entry would be preferred.
The EU is sending increasing signs that it is heading into a recession. Since the PMI data points released on the 23rd of June printed below the market’s minimum expectation at 51.9 (for the composite Flash reading) there have been some further signs of a slowing eurozone.
The German balance of trade on July 04 came in at -1 billion and the prior was revised down from 3.5 to 3.1billion. The French final PMI data was revised down lower on July 05 and German industrial production missed expectations at 0.2% m/m.
The GBP saw some mild bids on the news that PM Johnson will be resigning. The housing data from Halifax also showed that the house price index remained buoyant and the GBP has been sold off for some time already. So, there really needs to be some more bad news to send the GBP even lower.
This means that for the coming week it is reasonable to expect the EURGBP to find sellers on any rallies higher.
Major Trade Risks: The major risk here is if there is a shift in either the monetary policy outlook from either the ECB or the BoE or in growth prospects.