Snapshot: EUR/GBP trades at 0.8659, down 0.20% on the session. The weakness is being driven by a relative rates divergence as UK yields are underperforming US rates. No major catalysts are expected from the US today.
- Watch 0.8650; break opens a test of recent lows near 0.8620.
- Risk of a short squeeze remains present given the overall GBP short positioning.
Bias into NY: We favour further downside in EUR/GBP towards 0.8620 as the relative rates picture continues to weigh. Any rally above 0.8685 should be viewed as an opportunity to fade.