EUR/GBP nudges lower, but fails to break under 50DMA for now amid subdued conditions

• EUR/GBP continues to nudge lower, but recently bounced at its 50DMA around 0.8520.
• Amid a lack of key fundamental updates, focus turns to more BoE and ECB speak on Tuesday.

EUR/GBP continues to nudge lower in wake of Monday’s decline, though has in recent trade seen a modest bounce from the 50-day moving average at 0.8522. The pair currently trades in the 0.8530s, with modest on the day losses of about 0.1% and is now down about 0.6% from earlier weekly highs at the 200DMA around 0.8590. Trading conditions right now are subdued across G10 FX markets, meaning it may be a struggle for EUR/GBP to break below support, both in the form of the 50DMA and the 12 October/early November highs at around 0.8515 just below it.

In terms of fundamental updates, Brexit has been in the headlines, there has been some economic commentary and a few data releases, but nothing to significantly shift the dial for GBP. Starting with the former; reports suggested early on Tuesday that the EU was preparing a package of retaliatory measures against the UK if its triggers Article 16, measures which were allegedly going to be presented to the UK Brexit Minister Lord David Frost at the end of the week as a deterrent. But more recently, European Commission officials were on the wires denying that such a package of measures was being prepared. Simultaneously, talks between the UK and France on fishing rights continued, with the French Secretary of State for European Affairs Beaune reiterating this morning the need for a quick solution.

In terms of data; German and French trade numbers for September were out on Tuesday morning, the former posting a slightly smaller than expected, but still healthy trade surplus on the month of EUR 13.2B, the latter posting a slightly smaller than expected trade deficit of EUR 6.778B. The German ZEW survey for October was also released, with the forward-looking Economic Sentiment index posting a surprise rise to 31.7 from 22.3, but the Current Conditions index falling more than expected to 12.5 from 21.6.

Day Ahead

Looking ahead, attention turns to Tuesday’s BoE and ECB speakers; ECB hawk Klass Know it speaking at 1400GMT, BoE MPC member Ben Broadbent is speaking to the UK Parliament at 1530GMT on labour shortages and BoE Governor Andrew Bailey and ECB’s Isabel Schnabel are speaking on a panel on inequality at 1600GMT. Further “evidence that the (BoE) MPC is in no particular hurry to tighten policy from here could continue to keep the GBP on the defensive vs the USD and the EUR” says Credit Agricole, adding that they “remain long EUR/GBP”.