Yesterday, the EURGBP trading didn’t look that different from the previous days. The euro crisis was still the key factor for trading on most markets. The negative headlines on Spain and on the Spanish banking sector kept the euro under pressure against most majors. However, the pressure on EURGBP was far more contained compared to what was the case in the headline EUR/USD cross rate. EURGBP hovered in the 0.7980/0.8000 area during the morning session in Europe. The UK eco data (M4, lending and mortgage data) were slightly better than expected, but they were again no big issue for sterling trading. Around noon, EURGBP finally did catch up with the downtrend of EUR/USD.
The pair reached an intraday low at 0.7972 late in European trade. However, sterling (cable) was not really able to decouple for the broader trend of EUR/USD. EURGBP later even reversed the early losses and closed the session at 0.7990, little changed from the 0.7992 close the previous days. There is no obvious explanation for this poor performance of sterling. Of course, the recent economic performance of the UK was hardly any better compared to the euro-zone average and UK policymakers continue to warn that the negative developments in the EMU might have a big fall-out on the UK economy, too. The printing press of the Bank of England might still be reactivated.
Today the UK GfK consumer confidence showed a slight improvement from -31 to -29 (-32 expected). However, this was no help for sterling, at least not against the euro. EURGBP even tries to regain the 0.80 mark at the moment of writing. We see this in the first place as a broader euro correction after the unidirectional move of the previous days. UK Nationwide house prices were also marginally better than expected. Later today, the UK calendar is thin. So, the global performance of the euro will remain the key factor for EURGBP trading.
The global trend of the euro is negative, but we wouldn’t be surprised to see some kind of a temporary setback after the very sharp down-moves of late.