EUR/GBP consolidates at multi-week highs above 0.8900

• EUR/GBP rally from 0.8700 consolidates at six-week highs above 0.8900.
• Pound underperforms on Brexit tensions and COVID-19 consequences.
• The sterling will continue weakening until the Brexit situation clarifies – Danske Bank.

The EUR/GBP is on track to close its best week in two months rallying nearly 2.5% with the pound hit by fears of the COVID-19 consequences and Brexit risks. The pair has surged from levels right above 0.8700, to break through previous highs at 0.8860 area and sit comfortably at six-week highs above 0.8900

Brexit tensions send the pound tumbling across the board

The sterling has been the worst performer of the G10 currencies this week. With the UK facing the highest COVID-19 fatality rate in Europe, the GBP has been under pressure on the lack of guidance about the country’s plans to come out of the lockdown.

Furthermore, the poor progress in the Brexit talks has added negative pressure on the pound today. The differences between the negotiators and Britain’s refusal to extend the transition period are boosting market concerns about the possibility of a no-deal Brexit, which has intensified negative pressure on the pound.

EUR/GBP: heading to 0.90 in one month – Danske Bank

The FX Analysis team at Danske Bank expect the pound to continue weakening on Brexit tensions, “We see EUR/GBP at 0.90 in 1M, 0.90 in 3M and 6M (unchanged) followed by a move towards 0.86 on a trade deal in 12M.”