- A combination of factors dragged EUR/GBP to a nearly four-week low on Thursday.
- Recession fears continued weighing on the shared currency and acted as a headwind.
- Reduced political uncertainty lifted sterling and further contributed to the selling bias.
The EUR/GBP cross prolonged its recent pullback from the 0.8680 region and continued losing ground for the fourth successive day on Wednesday. The downward trajectory dragged spot prices to a nearly four-week low, with bears now awaiting sustained weakness below the 0.8500 psychological mark.
The shared currency continued with its relative underperformance amid the ongoing energy crisis in Europe, which could drag the region's economy faster and deeper into recession. The market worries were further fueled by European Commission chief Ursula von der Leyen's warning on Wednesday, saying that the EU needs to make emergency plans to prepare for a complete cut-off of Russian gas.
On the other hand, the British pound drew some support from modest US dollar pullback from a two-decade high and the prospect of reduced political uncertainty. In the latest development, UK Prime Minister Boris Johnson announced his resignation, marking the end of the recent political drama in the country. Johnson's departure, however, was almost a certainty and largely priced in by markets.
Furthermore, investors remain worried that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union. Apart from this, expectations that the Bank of England would adopt a gradual approach towards raising interest rates amid growing recession fears acted as a headwind for sterling. This, in turn, should limit losses for the EUR/GBP cross.
Hence, any subsequent downfall is more likely to find decent support near a technically significant 200-day SMA, currently around the 0.8445 region, which should act as a strong base for the EUR/GBP cross. That said, a convincing break below would be seen as a fresh trigger for bearish traders and set the stage for a further near-term depreciating move.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD declines toward 1.0850 after US data
EUR/USD extends its downward correction toward 1.0850 in the American session. The US Department of Labor reported that there were 222,000 first-time application for unemployment benefits last week, helping the USD hold its ground and causing the pair to stretch lower.
GBP/USD corrects to 1.2650 area on modest USD recovery
After touching its highest level in over a month at 1.2700, GBP/USD reversed its direction and declined toward 1.2650 on Thursday. The modest USD rebound seen following Wednesday's sharp decline makes it difficult for the pair to regain its traction.
Gold aims to retest the $2,400 area
Gold advanced toward $2,400 on Wednesday as US Treasury bond yields pushed lower following the April inflation data. The recovery in US yields combined with the US Dollar's resilience after Jobless Claims data, however, causes XAU/USD to retreat toward $2,370 on Thursday.
Is the crypto bull run back? Premium
Bitcoin’s ascent to $65,000 seems to have breathed hope into the choppy crypto markets. Some altcoins have shot up 10% to 20% due to BTC’s comeback. Investors wonder if this is the resumption of the crypto bull run.
BRICS, the West and the rest – global trade hubs and de-dollarization
World trade is fragmenting into opposing blocks, warns the IMF. The BRICS and their allies are distancing themselves from the West. BRICS are attempting to de-dollarize and replace SWIFT to circumvent the threat of sanctions.