Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

EUR/GBP: downtrend pauses but remains intact

EUR/GBP is likely to resume its move lower in the medium term as a no-deal Brexit looks increasingly unlikely. The pair is an accurate reflection of Brexit market sentiment.

EUR/GBP traders continue to price out no-deal Brexit

The sharp fall in EUR/GBP seen over the last five weeks has paused a fraction away from lows seen nearly three months ago as traders continue to price out the option of the UK leaving the European Union (EU) without a deal. While nothing is straightforward where Brexit is concerned, moves and commentary from both sides suggest that there is more urgency towards finding a common ground. EUR/GBP is the market’s ‘Brexit Play’ and will remain so going forward.

Over the previous weeks, UK prime minister Boris Johnson has changed his tune marginally from previously bullish statements saying that the UK is leaving the EU on 31 October deal or no-deal, to a marginally more consolidatory stance saying that a deal is his preferred option. The EU also remain firm in their stance but have also hinted that while concessions may be found to bring both sides together, the current withdrawal agreement will not be changed.

Learn more about trading forex markets

EUR/GBP the cleanest currency pair to trade Brexit

To this end the EU and UK recently announced that they would be increasing the frequency of their meetings and would be talking daily to try and flesh out a way forward. While 31 October remains the final deadline for Brexit, if a deal is to be reached then its needs to be presented to the European Council at their meeting in Brussels on 17-18 October at the latest.

The cleanest pair to trade Brexit is EUR/GBP and recent market moves suggest that a no-deal Brexit is starting to be priced out of the market. A look at the EUR/GBP chart shows the pair falling for the last six weeks from a near three-year high at £0.9325, as EU-UK talks intensify.

EUR/GBP likely to fall further on positive Brexit negotiations

If Brexit negotiations take a positive turn, and no-deal exit is taken off the table for good, EUR/GBP is likely to fall further. The chart shows that EUR/GBP has retraced more than 50% of the early March to mid August rally and continues to head lower. Initial support for the pair comes from the 200-day moving average, currently at £0.8825, before the 61.8% Fibonacci retracement level at £0.8798 comes into play. A clean break and close below here would open a larger move all the way back to the start of this year’s rally at £0.8472. The chart also shows a bearish sequence of lower highs and lower lows off the 12 August high, while the pair are also below both the 20-day moving average and 50-day moving average, adding to bearish momentum.

In the event of the UK leaving the EU without a deal – hard Brexit – then the recent £0.9325 high will be tested quickly and may not hold.

EUR/GBP daily price chart (February – 19 September 2019)

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.8 pips on EUR/USD
  • Analyze market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on the most popular forex markets

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading forex provider.

Stay on top of upcoming market-moving events with our customisable economic calendar.