- EUR./GBP gains some follow-through traction and climbs to a near two-week high on Friday.
- Bets for more aggressive policy easing by the BoE undermine the GBP and remain supportive.
- An upward revision of the UK Construction PMI does little to provide any meaningful impetus.
The EUR/GBP cross prolongs this week's goodish bounce from the 0.8530 support area for the fifth straight day and climbs to a one-and-half-week high during the first half of the European session. Spot prices currently trade around the 0.8585 region, with bulls now awaiting a sustained strength beyond the 100-day Simple Moving Average (SMA) before positioning for any further gains.
The British Pound (GBP) continues with its relative underperformance in the wake of rising bets for at least four interest rate cuts this year by the Bank of England (BoE), starting in June, which, in turn, is seen acting as a tailwind for the EUR/GBP cross. The GBP bulls, meanwhile, seem unaffected by an upward revision of the UK Construction PMI, which moved into expansion territory last month for the first time since August 2023. Meanwhile, the shared currency draws support from an upward revision of the Eurozone Services PMIs for March and hawkish comments from the European Central Bank (ECB) Governing Council member Robert Holzmann earlier this week.
Holzmann – a known hawk – said on Wednesday that he isn’t against a June interest rate cut but would want to see more data before making a decision. This further contributes to the bid tone surrounding the EUR/GBP cross. Meanwhile, inflation in the Eurozone has been falling faster than expected, which has been fueling speculations that the ECB could cut rates sooner rather than later. This might hold back the Euro bulls from placing aggressive bets and keep a lid on any further appreciating move for the currency pair. Hence, it will be prudent to wait for some follow-through buying before confirming that spot prices have bottomed out in the near term.
From a technical perspective, momentum beyond the 100-day SMA is likely to confront stiff resistance near the very important 200-day SMA, currently pegged near the 0.8600 mark. A sustained strength beyond the said handle will be seen as a fresh trigger for bullish traders and set the stage for some meaningful upside for the EUR/GBP cross.
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