EUR/GBP drops to daily lows near 0.8960

• EUR/GBP tested tops near 0.9020 earlier in the session.
• GBP-buying is fuelling the downside in the cross to the 0.8960 zone.
• UK’s Manufacturing PMI came in at 40.7 for the month of May.

The strong note around the sterling is forcing EUR/GBP to fade the initial uptick to the 0.9015/20 band and recede to the current area of daily lows near 0.8960.

EUR/GBP navigates 3-day lows

EUR/GBP is adding to Friday’s losses, coming under extra selling pressure after another rejection from the area beyond the key barrier at 0.9000 the figure.

Despite the better mood in the risk universe, the earlier uptick in the single currency lacked follow through, allowing sellers to step in and drive the cross lower. The correction has been helped as well by the resilient mood in the sterling in a context of persistent dollar weakness.

Earlier in the calendar, the UK Manufacturing PMI matched the advanced readings at 40.7 for the month of May, while the German and EMU gauges came in a little below the flash prints.

What to look for around GBP

Despite the renewed buying pressure surrounding the quid, the currency is expected to remain under the microscope in the short/medium-term. In fact, rising criticism over the mishandling of the coronavirus crisis by the UK government, increasing bets of extra easing by the BoE (including negative interest rates) and the forecasted deep recession the country is predicted to face in the first half of the year are all expected to keep the demand for the sterling subdued.

EUR/GBP key levels

The cross is losing 0.27% at 0.8959 and a breach of 0.8880 (low May 26) would expose 0.8873 (55-day SMA) and then 0.8700 (200-day SMA). On the other hand, the initial hurdle aligns at 0.9054 (monthly high May 29) followed by 0.9324 (2019 high Aug.12) and finally 0.9499 (2020 high Mar.19).