- EUR/GBP consolidated this week’s strong gains and held steady above the 0.9200 mark.
- Brexit-related uncertainties continued undermining the sentiment around the sterling.
- Lagarde’s overnight comments further contributed to the euro’s relative outperformance.
The British pound underperformed against its European counterpart and assisted the EUR/GBP cross to hold steady above the 0.9200 round-figure mark.
The cross now seems to have entered a bullish consolidation phase and was seen oscillating in a range through the first half of the trading action on the last day of the week. The strong positive move was sponsored by some aggressive selling around the sterling amid persistent Brexit-related uncertainties.
Against the backdrop of the deadlock in Brexit talks, the EU threatened to pursue legal action against the UK over breach of the Brexit withdrawal agreement if it doesn’t drop the so-called Internal Market Bill. This, in turn, was seen as one of the key factors that continued undermining the pound.
The GBP bulls seemed rather unimpressed by Friday's UK macro data dump, which showed that the economy expanded by 6.6% in July as compared to 6.7% expected and 8.7% previous. The slight disappointment was largely offset by better-than-expected UK Industrial and Manufacturing production figures.
On the other hand, the shared currency remained well supported by Thursday's not so dovish (hawkish) comments by the European Central Bank (ECB) President Christine Lagarde. During the post-meeting press conference, Lagarde said that there was no need to over-react to the euro's recent appreciation.
The ECB was also upbeat about the economic developments and noted that the incoming data since the last policy meeting in July suggest a strong rebound in activity, broadly in line with expectations. The central bank now expects the GDP to fall 8.0% this year as against the -8.7% forecasted in June.
Given that the cross has rallied over 400 pips from three-month lows set earlier this month, bulls took a brief pause on Friday. Nevertheless, the cross remains on track to end the week with strong gains and possibly record the highest weekly close since August 2019.
Technical levels to watch
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