EUR/GBP: Great two-way business as pound is thrashed around ahead of today's Brexit vote

• EUR/GBP has been making tracks to the upside as GBP losing some shine ahead of the UK Parliamentary vote.
• EUR/GBP is currently trading at 0.8686, from a low of 0.8655 and a high of 0.8715. 

EUR/GBP has been good two-way business following the highs scored in overnight trade and late Asia to the low scored in late London, for it to flip back on the bid to 0.8699 in North American trade. 

The volatility could be attributed to a) mixed sentiment and uncertainties surrounding Brexit, B) thin markets as speculators sidelines the sidelines awaiting a catalyst elsewhere and from today's UK Parliamentary vote on PM May's Plan B - More on that here: When is the UK Parliamentary vote and how could it affect GBP/USD?

Aside from Brexit, ears are going to be on the ground for Sino/US trade talks starting again from tomorrow. There is a widespread acknowledgement that risks to growth have spread well outside China and, last week, ECB President Draghi recognized the increased downside risks to growth in the Eurozone. Markets are now of the opinion that any hawkish changes to policy from the ECB have met a brick wall which had been playing into the bear's hands following the ECB meeting.

Eyes on the Fed

However, a great deal of focus will be on the Fed this week. If the FOMC decides to pause, priced in and widely expected, but signal that they will pause for the foreseeable future, that will send a huge signal to the market that the end of the cycle is nigh due to the risk of a US recession around the corner which would likely see the euro supported as the dollar depreciates, supporting the upside in the cross. 

"According to our model, the risk of a recession in the US next year has now climbed to 69%.  In our view this means that by the time the summer comes, the Fed will find itself unable to hike policy any more," analysts at Rabobank argued. 

EUR/GBP levels

Analysts at Commerzbank are allowing for a possible rally back into the 0.8775/.8810 band ahead of failing.

"Failure at 0.8620 would suggest an ongoing weakness to the base of the channel at 0.8547 and potentially the 200-week ma at 0.8341. The market stays directly offered below the 200-day ma at 0.8864, and only above here allows for a move to the 55-day ma at 0.8904 and this, together with the October 0.8941 high, are expected to contain the topside."