• EUR/GBP pares losses and returns to 0.9100 area.
  • The pound loses ground with investors growing cautious about the Brexit talks.
  • EUR/GBP unlikely to drop below 0.8800 over the coming months – Rabobank.

The euro has pared previous losses on Friday after bouncing from 0.9000 lows earlier this week and appreciate about 0.7% on the day returning to 0.9100 area as the previous optimism about a Brexit agreement eases.

Investors become cautious about a Brexit deal

The euro rallied on Friday as the investors curbed their enthusiasm about a breakthrough in the Brexit talks as the negotiators return to the table. EU representative, Michael Barnier, has reminded that fishing remains a controversial issue and the investors have taken a cautious stance about the possibility of another disappointment.

The pound surged across the board earlier this week on the back of news reporting that the UK and EU negotiators agreed to resume the talks, halted abruptly last week. Market optimism was boosted further by comments suggesting that the EU was aiming for a deal on mid-September that would avoid an unfriendly divorce.

EUR/GBP seen steady above 0.88/89 over the coming months– Rabobank

From a longer-term perspective, the FX analysis team at Rabobank sees the pair moving above 0.88 over the coming months: “While a trade deal between the EU and the UK would likely trigger a relief rally in the pound we expect a move to be half-hearted. The risk that a deal would lack the comprehensiveness that had once been hoped for, combined with the vulnerable nature of the UK economy and the weak popularity levels of the PM suggest that GBP will still face several hurdles next year(…)We see little prospect of EUR/GBP being able to push much below the 0.89/0.88 area in the coming months.”

Technical levels to watch

 

 

  • NZD/USD bounces up from 0.6650 and returns to 0.6680 area.
  • Kiwi appreciates more than 1% this week with the USD on the defensive.
  • NZD/USD remains supported by global sentiment – Westpac.

 

New Zealand dollar’s bearish reversal from one-month highs above 0.6700 seen on the early US session found support at 0.6650 area and the pair picked up again to return to the 0.6680 area approaching the weekly close.

The kiwi appreciates with the US dollar pulling down

The NZD has been going through a solid rally over the last three days. The pair bounced up week lows at 0.6550, and is on track to close the week with gains beyond 1%.

Kiwi’s uptrend was halted earlier today, as the pair retreated from multi-week highs above 0.6700 with the US dollar going through a modest recovery as risk appetite faltered during the early US session. NZD, however, managed to come back later on, with the US resuming its near-term downtrend.

The US dollar has been trading on a weak footing this week with investors cautious amid the uncertainty about the US elections and mixed news coming from the US stimulus negotiations. The upbeat US PMI data seen earlier today has been practically unnoticed and the USD has lost more than 1% against a basket of the most traded currencies this week.

NZD/USD remains supported by global sentiment – Westpac

The Westpac FX analysis team sees the New Zealand dollar buoyed by the near-term global sentiment: “NZD/USD remains supported near-term by global sentiment, such that a test of 0.6700 during the next few days is possible (…) Global influences should dominate domestic surprises such as today’s weaker-than-expected CPI inflation data. While the data surprise supports the RBNZ’s view that much more work needs to be done to drive inflation towards target, markets have already priced a large OCR cut next year so the NZD/USD impact of today’s news is likely to be minor.”

Key levels to watch