EUR/GBP: impressive rally to above key resistance line, eyes on 0.9059

Currently, EUR/GBP is trading at 0.8849, up 0.74% on the day, having posted a daily high at 0.8869 and low at 0.8779.

EUR/GBP remains better bid while the UK's political environment anchors sterling. In Europe, the political environment and subsequent developments have generally been favourable, so far. 

"To be sure, challenges remain. Catalonia's pursuit of a referendum on independence later will force a confrontation with Madrid.  Austria and Finland face challenges from the anti-immigration and anti-EU forces. Italy will likely hold elections in around a year's time, which gives the Five-Star Movement time to readdress internal fissures," explained analysts at Brown Brothers Harriman. 

A poor start to Brexit negotiations should anchor the pound

GBP: Short-term woes, long-term hopes - ING

However, and as analysts at ING note, given that the purpose of the General Election was to enhance the political stability of the incumbent Conservative government, these short-term political unknowns will likely keep GBP under pressure over the summer; "A modest 1-2% domestic political risk premium – coupled with a more concerning slowdown in the UK economy – could see GBP/USD trade down to 1.24-1.25 and EUR/GBP up above 0.90." 

The week ahead: Central Banks, UK and EZ key data, antipodeans in focus

Economically, we look to EZ and UK CPI, German ZEW, UK jobs, retail sales and the BoE. The FOMC is another event that could impact the price of the cross on a surprise outcome.

EUR/GBP levels

EUR/GBP rallied through the 0.8852 January high and pushed on through to the highest levels since November 2016. It is an impressive score considering 0.8858 was the 50% retracement of the move down from the 0.9403 spike high, noted analysts at Commerzbank, "Above here we have nothing until 0.8987/0.9059, the 61.8% retracement and the highs from mid-October. Where are we wrong? It is bid above the 0.8659 short term uptrend and only below here will trigger losses to the 0.8609/8555 200 and 55-day ma."