- The Euro’s recovery from the 0.8600 area extends beyond 0.8700.
- The pound weakens after Prime Minister Truss sacked his finance minister.
- EUR/GBP faces resistance at 0.8750 and 0.8865.
The euro rallied on Friday after the sharp declines seen over the previous two days. The pair moved back above 0.8700 following confirmation that Prime Minister Liz Truss has sacked Finance Minister Kwasi Kwarteng.
The pound retreats after a two-day rally
The euro took advantage of the pound’s weakness to appreciate around 0.8% on Friday, with cable revealing earlier gains sparked by speculation of a reversal of the British government’s controversial tax cuts plan.
With no relevant macro data in the UK or EU, investors remained cautious about long GBP positions, wary of potential volatility. Friday is the deadline set by the Bank of England to end its bond buying program.
EUR/GBP should break above 0.8750 to gain ground
On the upside above 0.8700, the pair is likely to extend past 0.8750, where the 100 and 200 hourly SMAs meet, to target the October 12th high at 0.8865.
On the downside, the support at 86.15 holds the decline so far. Below that, the next potential targets could be at 85.65 (6th September low) and 83.90/00 (8th, 17th & 24th August low).