EURGBP retreats to 0.8700 area after rejection at 0.8785

• The euro fails to break resistance at 0.8785 and retreats to 0.8700.
• The pound remains bid with the US dollar losing ground.
• EURGBP is expected to depreciate in the longer-term – Danske Bank.

The euro is pulling back on Monday, giving away gains after a three-day rally last week. The pair was rejected at the 0.8785 resistance area during the early European session before pulling back to the 0.8700 area, against a stronger British pound.

The GBP appreciates amid broad-based USD dollar

The favorable market mood witnessed on Monday, which is weighing further on the safe-haven US dollar, has increased support for the GBP, with investors focusing on the British Government’s plans to tackle UK’s debt crisis.

Finance minister Jeremy Hunt is working on a plan to fill a 50 billion pound deficit in the country’s finances, which contemplates spending cuts between 30 and 35 billion and tax increases of between 20 and 25 billion, according to market sources.

The project will be presented on November 17 with the intention to restore investors’ confidence after the market turmoil triggered by Liz Truss’ tax-cutting program presented in late September.

EURGBP: Expected to move lower in the long term – Danske Bank

Currency analysts at Danske Bank expect the pair to appreciate in the short term and lose ground in the longer term: “We see a case for EURGBP to remain elevated in the near-term, but in the longer-term expect the cross to move lower as a global growth slowdown and the relative appeal of UK assets to investors are positive for GBP relative to EUR.”

Technical levels to watch