EUR/GBP climbs to 0.8800 neighborhood, 1-1/2 week tops post-UK/Euro-zone macro data

   •  Brexit uncertainties/dismal UK PMI exerts some fresh pressure on the British Pound.
   •  The common currency gets a minor lift from slightly stronger core inflation figures.

The EUR/GBP cross regained traction on Friday and climbed to 1-1/2 week tops, back closer to the 0.8800 handle in the last hour.

After yesterday's brief pause, the cross caught some fresh bids on the last trading day of the week and traded with a positive bias for the fourth session so far this week, recovering a major part of the last week's sharp fall to eight-month lows.

Against the backdrop of looming Brexit uncertainties, especially the stalemate situation over the Irish backstop issue, today's disappointing UK manufacturing PMI print for January was seen exerting some fresh downward pressure on the British Pound.

James Knightley, chief international economist at ING, writes: “After all, we are so close to Brexit day and an economically disruptive 'hard' Brexit remains firmly on the table. The fact that the overall reading wasn't stronger suggests that final demand for finished products is subdued.”

The up-move got an additional boost on the back of some buying witnessed around the shared currency following the release of surprisingly stronger flash Euro-zone core inflation figures, now estimated to rise 1.1% y/y as against 1.0% expected, and the previous.

It, however, remains to be seen if the cross is able to sustain at higher levels or the positive momentum quickly runs out of steam, given the recent dovish shift by the ECB. As Bert Colijn, senior economist at ING, suggests: “The ECB’s own expectations of 1.4% core inflation for the year look a tad optimistic already, meaning that downward adjustments could well happen in March.”

Technical levels to watch