EUR/GBP returns above 0.8700 after UK’s finance minister’s dismissal

• Euro recovery from the 0.8600 area extends past 0.8700.
• The pound weakens after PM Truss sacks her finance minister.
• EUR/GBP faces resistance at 0.8750 and 0.8865.

The euro is picking up on Friday after the sharp declines seen over the previous two days. The pair returned above 0.8700 on the confirmation that Prime Minister, Liz Truss, has dismissed the finance minister Kwasi Kwarteng.

The pound pulls back after a two-day rally

The euro is capitalizing on the pound’s weakness to appreciate about 0.8% on Friday, with the cable giving away previous gains triggered by speculation about a U-turn on the UK Government’s controversial tax cuts plan.

In the absence of relevant macroeconomic data in the UK or the EU, investors have remained cautious regarding GBP longs, wary about potential volatility. Friday is the deadline set by the Bank of England to end its bond-purchasing program.

EUR/GBP should breach 0.8750 to gain traction

On the upside, above 0.8700, the pair should extend beyond 0.8750, where the 100 and 200-hour SMA meet, to aim towards the October 12 high at 0.8865.

On the downside, the support at 86.15 is holding bears so far. Below here, the next potential targets could be at 85.65 (September 6 low) and 83.90/00 (August 8, 17, and 24 lows).

Technical levels to watch