EUR/GBP holds above 100 EMA amid Brexit deal hopes

The euro to pound (EUR/GBP) exchange rate is loitering near its lowest point since January as investors focus on the Brexit debate. It is also struggling as concerns about the relatively elevated European Union’s core inflation. The closely-watched forex cross was trading at 0.8830, a few points below this month’s high of 0.8977.

Brexit concerns remain

The main game in town this week will be the upcoming Brexit news. In a tweet on Sunday, Ursula von der Leyen, the head of the European Union said that she was working on the Northern Ireland protocol. Rishi Sunak, the UK prime minister has also been focused on how to handle the stickiest part of Brexit.

The two leaders will meet on Monday and deliberate on key issues on Brexit. Signs are that the two sides are ready to make compromises on the Northern Ireland issue that has remained sticky for years. A deal will be a good thing for both the European Union and the UK.

However, the current nature of UK politics means that a deal is not all but assured. A good number of Tory members have vowed not to support the deal since it gives too much power to the European Union. According to the Times, Sunak has won some concessions from the EU. 

As such, Rishi Sunak will be forced to seek votes from Labor. Judging by recent history, this issue could crash his administration.

The EUR/GBP price will also react to several important economic numbers from Europe this week. Eurostat will publish the flash consumer inflation data later this week. These numbers will provide more information about the current state of things. Core inflation has remained sticky in the past few months.

The other important catalyst for the euro to pound exchange rate will be the flash manufacturing and services PMI numbers.

EUR/GBP forecast

The EUR to GBP price has been in a broader bullish trend in the past few months. It has managed to move from a low of 0.8208 to a high of 0.8977. The pair has pulled back to 0.8787, which is at the middle of the ascending channel. It has also remained stubbornly above the 50-day and 100-day moving averages. 

Therefore, the pair could continue falling as sellers target the lower side of the channel at 0.8680. This view will only be confirmed if it crosses the two moving average areas.