EUR/GBP remains on the defensive near 0.8400 mark post-German IFO

• EUR/GBP failed to preserve its intraday gains and witnessed selling near the 0.8415 region.
• The euro witnessed some selling on news of a deal on Germany’s next governing coalition.
• Brexit-related uncertainties acted as a headwind for the sterling and might help limit losses.

The EUR/GBP cross quickly retreated over 20 pips from the early European session high and slipped back below the 0.8400 round-figure mark in the last hour.

The cross struggled to capitalize on its modest intraday uptick, instead met with a fresh supply near the 0.8415 area and extended the previous day's pullback from a multi-day high level of 0.8431. The latest leg of a sudden fall lacked any obvious catalyst but followed news that Germany’s Finance Minister Olaf Scholz has signed a coalition agreement to become the next chancellor.

On the economic data front, the headline German IFO Business Climate Index fell from 97.7 to 96.5 in November, missing consensus estimates for a reading of 96.6. Adding to this, the Expectations Index – indicating firms’ projections for the next six months – dropped to 94.2 during the reported month. The data did little to impress the euro bulls or lend any support to the EUR/GBP cross.

Meanwhile, the impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. This, in turn, held back bearish traders from placing fresh bets and limited deeper losses for the EUR/GBP cross. That said, the pair's inability to gain any traction suggests that the near-term bearish trend is still far from over.

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