Forex Market: EUR/GBP off 12-week highs ahead of EU-China summit, macro data, a spike in new COVID-19 cases keeps investors wary

Having advanced to a 12-week high of 0.9073 on Friday, EUR/GBP traded slightly lower during early European session on Monday. The minor pair remained affected by both divisions among EU leaders over the structure of a planned coronavirus recovery fund and prospects of a no-deal Brexit since EU-UK trade negotiations have shown little progress.

At the same time, a surge in new confirmed COVID-19 cases globally has prompted caution among investors, as they weighed the probability of new lockdowns being imposed. Total confirmed cases of the illness have already surpassed 8.8 million worldwide.

“We expect the FX markets to remain caught between recovering economic indicators and concerns about a second-wave of COVID-19 infections in the week ahead,” Barclays analysts wrote in an investor note. They also suggested a larger-than-expected improvement in manufacturing and services PMI data, scheduled for release tomorrow, could support the Euro.

The European Union and China are to hold their first formal talks at a video summit today since relations between the two sides soured due to accusations China has not provided appropriate information regarding COVID-19. EU officials claim China has aimed to pressure countries within the bloc, which criticize how Beijing has handled the coronavirus crisis. China has allegedly used social media platforms to spread misinformation about Europe’s neglect of COVID-19 patients.

As of 7:08 GMT on Monday EUR/GBP was edging down 0.13% to trade at 0.9040, after earlier touching an intraday high of 0.9061, or a level not far from Friday’s 12-week high.

Meanwhile, on today’s macroeconomic front, consumer confidence in the Euro Area probably continued to improve in June, according to expectations. The preliminary consumer confidence index probably rose to -15.0 in June from -18.8 in the previous month. In May, households’ expectations in terms of their financial conditions, intentions to make major purchases and in regard to the general economic situation showed improvement. The preliminary data will be released at 14:00 GMT.

At 14:15 GMT European Central Bank Vice President Luis de Guindos is scheduled to speak at the 2020 Frankfurt Finance Summit in Frankfurt, while at 16:30 GMT ECB Board Member Philip Lane will speak at COVID-19 webinar series organised by the Bendheim Center for finance at Princeton University.

Bond Yield Spread

The spread between 2-year UK and 2-year German bond yields, which reflects the flow of funds in a short term, equaled 63.5 basis points (0.635%) as of 6:15 GMT on Monday, up from 63.3 basis points on June 19th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.9044
R1 – 0.9081
R2 – 0.9110
R3 – 0.9146
R4 – 0.9183

S1 – 0.9015
S2 – 0.8978
S3 – 0.8949
S4 – 0.8920

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