EUR and GBP breaking up?

G̶u̶t̶e̶n̶ ̶M̶o̶r̶g̶e̶n̶

Good morning.

Here's a trade idea for you on EURGBP

I want to get this out nice and quickly so I'll summarise quickly so you can digest it.

The threat of these European lockdowns in my mind are weighing heavily on an already fragile Eurozone.

Today, Macron is expected to announce a national lockdown for France, and Spain has already been provided with the powers to impose a national lockdown...

With inflation being pretty subdued in the bloc, I think this will pressure the Euro, since the effects of even a month's lockdown would likely have consequences for 6-9 months down the line - just as the ECB want inflation higher (which they won't get anyway in my opinion)...

But, that might be enough for ECB speakers to continue to talk down the Euro to try to support inflation expectations.

On GBP side, I do think the Brexit risk is subsiding somewhat for now.

We know the state of play, that both sides are 'talking' (doesn't tell us much), but I still believe that the UK has the upper hand.

For now, I think the European lockdowns are taking precedence.

What would be interesting is if Boris does introduce another lockdown - and what might be important is the difference in severity between a UK lockdown and a German & France...

I don't think he'll go as far as the other two nations, since I think the scientific advice has undermined itself since their shoddy and inaccurate estimations for mid-October cases, but we'll see.

Technically, I'm looking at EURGBP as a break of the double bottom, trade back into it as resistance and then sell - not advice, do what you like.

Something to note is that the bund is on a little bit of a tear this morning, likely showing that risk is subdued.

I like the look of those highs in the bund - I reckon we'll take 'em.

With yields falling again, the Euro should follow.

The ECB meet tomorrow and I will expect some mention again of talking down the Euro, just as Lane did back in September.