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The EUR/GBP about to push to 0.9100 due to political developments?

May 24, 2019 10:30

Economic events calendar

Source: Economic Events May 24, 2019 - Admiral Markets' Forex Calendar

Today, we'll be looking at a currently very political currency pair: the EUR/GBP. Over the last few days, uncertainties surrounding Brexit talks and obvious distrust in both prime minister May, and the opposing Labour Party, resulted in the EUR/GBP moving upwards for 14 trading days in a row after finding support at the current yearly lows around 0.8470.

Given how weak the Pound Sterling is currently, one clear profiteer is the Euro - a currency which will probably see some stronger headwinds in the near future, resulting from the potential disaster for established European parties in the upcoming election next Sunday.

The UK is witnessing the performance of Nigel Farage's Brexit party, which looks like they come out as the strongest UK party in the EU elections, but other nations see the performance of other Euro sceptical parties like the Lega under Salvini in Italy, or the National Front in France under Le Pen, causing headaches among Euro bulls.

Trading-wise, the push higher in the EUR/GBP and test of the region around 0.8840/50 is very interesting: a break higher could level the path for further gains, and activates the region around the current yearly highs respectively the 2018 highs around 0.9100.

This would be especially true if, after the developments in Austria over the last days where right-wing FPOe took a hit due to a corruption scandal stemming from its leader and vice-chancellor HC Strache, a subdued election result for the right-wing parties in Europe could trigger a short-squeeze in the Euro and push the EUR/GBP even further:

Source: Admiral Markets MT5 with MT5-SE Add-on EUR/GBP Daily chart (between March 7, 2018, to May 23, 2019). Accessed: May 23, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the EUR/GBP fell by 6.4%, in 2015, it fell by 5.2%, in 2016, it rose by 15.6%, in 2017, it increased by 4.2%, in 2018, it rose by 1.2%, meaning that after five years, it was up by 6.9%.

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