EUR/GBP rejected at 0.8875, fails to confirm above 0.8865 resistance

• EUR/GBP attempt to breach 0.8865 resistance fails at 0.8875.
• The sterling remains vulnerable on concerns about the COVID-19 impact on UK economy.
• Confirmation above 0.8865 might set the pair aiming to 0.9060 – Commerzbank.

The euro took advantage of British pound’s weakness on Wednesday to extend its rally from 0.8705 lows on Monday to six-week highs at 0.8875. The common currency, however, has been unable to consolidate at those levels and has returned to the previous range, below 0.87865.

Sterling underperforms on concerns about the UK economy

The pound has lost 2.8% against the USD and about 1.8% against the euro so far this month. The GBP remains vulnerable with the UK suffering the worst COVID-19 death rate in Europe, which forces the country to lag its neighbours on easing coronavirus restrictions.

Furthermore, the extension of the job retention scheme announced by the Government has triggered concerns about a tax rise to finance it, which has increased pressure on the GBP. As a matter of fact, the pound has found little support after the GDP showed a softer than expected contraction in March.

Above 0.8864/65, next potential target is 0.9060 – Commerzbank

According to Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, a successful break of 0.8865 would set the pair aiming towards 0.9060, “The EUR/GBP pair looks well placed to challenge 0.8864/65. A close above here will confirm a short term base targeting 0.9060. This potential base will remain valid while the market continues to trade above the April low at 0.8671.”