EUR/GBP bulls approach 0.8900 with eyes on ECB, BoE announcements

EUR/GBP bulls cheer the broad-based Euro (EUR) strength while refreshing the three-week high near 0.8900, taking rounds to 0.8890 by the press time of early Thursday’s Asian session. Additionally favoring the pair buyers could be the pessimism surrounding the UK workers’ strikes and downbeat factory output data. However, the cautious mood ahead of the monetary policy meeting of the European Central Bank (ECB) and the Bank of England (BoE) seems to probe the cross-currency pair’s further upside.

Also read: BoE Interest Rate Decision Preview: The last 50 bps hike but not the end yet

The Euro rallied the most in seven weeks against the British Pound (GBP) by spreading its broad-based gains from the US Dollar weakness. In doing so, the regional currency ignored downbeat inflation data at home. That said, the preliminary readings of the Euro area Harmonised Index of Consumer Prices (HICP) dropped to 8.5% YoY versus 9.0% expected and 9.5% prior. The Core HICP, however, came in unchanged at 5.2% compared to 5.1% market forecasts.

It should be noted that the US Federal Reserve’s (Fed) dovish hike could be held responsible for the US Dollar’s slump on Wednesday, which in turn allowed the EUR to rally against most counterparts.

Also fueling the EUR/GBP prices could be the mass strikes in the UK, as well as downbeat factory output. “Up to half a million British teachers, civil servants, and train drivers walked out over pay in the largest coordinated strike action for a decade on Wednesday, with unions threatening more disruption as the government digs its heels in over pay demands,” said Reuters.

On the other hand, the S&P Global/CIPS UK Manufacturing PMI confirmed a consecutive sixth monthly contraction in factory output with 47.0 figure versus 46.7 initial forecasts. “Weak demand from clients at home and abroad plus strong price inflation and a shortage of raw materials and staff all weighed on production. Brexit and port problems hurt exports while demand from China was particularly weak,” S&P Global said per Reuters.

On a broader front, Fed Chair Jerome Powell’s shift in favor of the rate cuts, if needed during late 2023, propelled bond-buying and equities, which in turn allowed the Euro to remain firmer ahead of the key ECB.

Moving on, market players will be more interested in the hints for slower rate hikes as both the central banks, namely the ECB and the BoE, are likely to announce 0.50% rate lift. It’s worth noting that the comparative economic soundness in the bloc and more hawkish comments from the ECB policymakers in the last couple of days favor the EUR/GBP bulls.

Also read: European Central Bank Preview: Lagarde needs to repeat her hawkish message

Technical analysis

Although the successful upside break of the 21-DMA, around 0.8815 by the press time keeps the EUR/GBP buyers hopeful, an upward-sloping resistance line from early November 2022, close to 0.8910 at the latest, appears a crucial hurdle for the pair traders to watch.