- EUR/GBP witnessed some follow-through selling for the second consecutive session on Thursday.
- Some repositioning trade ahead of the ECB policy decision seemed to exert pressure on the cross.
- Brexit woes, COVID-19 jitters acted as a headwind for the sterling and helped limit deeper losses.
The EUR/GBP cross quickly recovered few pips from three-day lows touched in the last hour, albeit lacked any follow-through buying and remained below the 0.8600 mark.
The cross added to the previous day's heavy losses and witnessed some follow-through selling for the second consecutive session on Thursday. The downward trajectory dragged the EUR/GBP cross further away from near two-month tops, around the 0.8670 region touched earlier this week.
The shared currency's relative underperformance against its British counterpart could be attributed to some repositioning traded ahead of the European Central Bank meeting. Apart from this, the intraday downfall lacked any obvious fundamental catalyst and is likely to remain cushioned.
The resurgence of the COVID-19 infections in the UK, along with the impasse over the Northern Ireland Protocol of the Brexit deal might continue to act as a headwind for the British pound. This, in turn, could extend some support to the EUR/GBP cross and help limit the downside.
In fact, new cases have been rising by more than 50,000 a day in the UK. On the Brexit front, the EU rejected the UK’s demand for a new approach to the Northern Ireland Protocol. This, along with the BoE Deputy Governor Ben Broadbent's comments, should cap gains for the sterling.
Broadbent said that he was not convinced that current inflation should mean higher inflation in 18-24 months – a more relevant time horizon for monetary policy. The market was quick to react and pushed back expectations for a 15 bps hike by the BoE to August 2022 from May 2022.
Heading into the highly-anticipated ECB monetary policy decision, investors also seemed reluctant to place any aggressive bets. This was seen as another factor that assisted the EUR/GBP cross to find some support near a multi-month-old descending trend-line resistance breakpoint.
Thursday's spotlight will remain on the ECB decision and any significant changes in the forward guidance. This, along with the ECB President Christine Lagarde's remarks at the post-meeting press conference, might produce some trading opportunities around the EUR/GBP cross.
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 clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.