EUR/GBP stalls below 0.9000 psychological level

• EUR/GBP rebound from 0.8880 lows stalls below 0.9000
• The euro loses steam as the GBP/USD regains lost ground
• GBP will remain weighed until a trade deal is reached – Danske Bank

The euro is slightly up against the pound on Wednesday, extending its rebound from 0.8880 lows earlier this week although unable, so far, to extend beyond 0.9000. The pair has lost steam on Thursday as the GBP/USD pares losses with the dollar pulling back.

The euro loses momentum against a firmer pound

The euro has steadied right below 0.9000 on Thursday, right below near two-month highs. The pair, however, is moving sideways with the sterling a tad firmer against the safe-haven US dollar and equity markets in green with hopes of economic recovery outweighing market concerns about geopolitical tensions.

On a broader scope, the pound remains on a weak tone, weighed by speculation about the Bank of England introducing negative interest rates and the lack of progress on post-Brexit trade agreement with the EU which may lead to a no-deal exit from the Union.

EUR/GBP will move to 0.90 before retreating to 0.86 – Danske Bank

The FX analysis team at Danske Bank expect the pound to remain bearish on Brexit tensions to pick up when the trade is reached, “We probably need to get close to the year-end deadline before a trade deal is reached. We see EUR/GBP at 0.90 over 1- 6M, followed by a move towards 0.86 on a trade deal in 12M.”