EUR/GBP hits fresh lows under 0.8500

EUR/GBP  dropped further to 0.8483, hitting the lowest level in six days. From there it bounced modestly to the upside and climbed back above 0.8500. It was trading at 0.8500/05, 30 pips below last week closing price. Earlier the pair approached Friday’s highs but it failed at 0.8580 and turned to the downside.

In the United Kingdom, the PM David Cameron announced that he intends to resign by Wednesday. Theresa May would become the next PM earlier than what Cameron announced after the UK referendum. The pound rose modestly in the market with the news, but in all fronts, still trades sharply lower compared to the level it had before June 23.

EUR/GBP outlook

The pair has been consolidating near multi-year highs since last Wednesday. “For now we couldn’t rule out a deeper correction towards 0.8450/25, but while this support holds we look for an eventual move back to set new highs. Through 0.8425/00 would suggest a deeper correction towards key daily support in the 0.8250-0.8100 region”, wrote analysts from Lloyds Bank.

To the upside, they note that above 0.8700 the next medium-term resistance is seen in the 0.9000-0.9200 region.