EUR/GBP flirts with weekly lows, around 0.8500 mark ahead of BoE

The EUR/GBP cross extended its steady intraday descent through the first half of the European session and was last seen trading near weekly lows, around the key 0.8500 psychological mark.

Following the previous day's good two-way price swings, the EUR/GBP cross came under some renewed selling pressure on Thursday and was pressured by a pickup in demand for the sterling. The optimism over the declining trend of new COVID-19 cases in the UK was seen as a key factor behind the British pound's relative outperformance.

This comes on the back of the European Union's decision to pause legal proceedings against the UK over the Northern Ireland protocol dispute. The GBP bulls further took cues from speculations that the Bank of England (BoE) could be among the first major central banks to begin the process of weaning its economy off stimulus support.

On the other hand, the shared currency witnessed a subdued/range-bound price action and so far, has failed to benefit from a modest US dollar weakness. With the GBP price dynamics turning out to be an exclusive driver of the EUR/GBP pair's intraday movement, the market focus will remain on the outcome of the latest BoE MPC meeting.

The UK central bank is widely expected to leave monetary policy settings unchanged. Hence, the key focus will be on the MPC vote distribution and updated economic projections. This, along with the BoE Governor Andrew Bailey's comments at the post-meeting press conference, will infuse some volatility around the GBP crosses.

Technical levels to watch