EUR/GBP returns to 0.9000 with the pound on the defensive

• EUR/GBP appreciates 1% on the day to return towards 0.90000 area.
• The pound dives on concerns about COVID-19 and Brexit.
• A weaker than expected  GDP has added concerns about the UK's economic outlook.

The euro is going through a remarkable comeback against a weakening pound on Thursday, appreciating more than 1% on the day to regain most of the ground lost earlier this week and returning to the 0.9000 area.

COVID-19 and Brexit hurt the pound

The pound is depreciating across the board on Thursday, hammered by a combination of the dramatic expansion of the coronavirus pandemic in the UK, the standstill on the Brexit negotiations and downbeat macroeconomic data.

The UK has been the first European country to reach 50,000 deaths by COVID-19, according to official figures released by the British Government on Wednesday. These numbers have ditched hopes of a vaccine anticipating disastrous economic consequences.

Beyond that, the Brexit negotiations remain deadlocked and are, most likely, missing the mid-November target for an agreement. Comments of “significant differences” and warnings about the possibility that the talks fall apart coming from the negotiators are eroding confidence on a last-minute deal that would avert an unorderly exit from the Union.

On the macroeconomic front, the preliminary UK Gross Domestic Products have failed to brighten the mood. The British economy expanded at a 15.5% year-on-year pace in the third quarter, falling short of the market expectations of a 15.8% increase. The main issue though has been the poor monthly GDP reading, which has shown a 1.1% rise in September, against the 1.5% expected, a fairly negative print if we bear in mind that data has been taken before the start of the second lockdown.

Technical levels to watch