- EUR/GBP has recovered off of earlier session lows in the 0.8500 area to trade flat on the day around 0.8520.
- Dip-buyers came in ahead of last Friday’s high and the 50DMA.
- The pair has carved out a 0.8500-0.8540ish range, though a move back towards the 200DMA may be on the cards.
EUR/GBP has eroded earlier losses and is back to trading flat on the day in the 0.8520 area as the end of the US session approaches. The pair found decent demand just under 0.8500, as traders bought at support in the form of last Friday’s highs and the 50-day moving average which currently resides just under 0.8490.
As traders assess the threat that the new Omicron variant poses to the global economy and what it means for central bank policy divergence, it is likely that EUR/GBP will continue to trade in rangebound fashion. To the upside, Tuesday’s high just above 0.8540 may cap the price action, while Wednesday’s lows around 0.8500 may form the near-term floor. Risk-off flows related to fears about the new variant have thus far favoured the euro over the pound. Should sentiment take a further knock in the coming days, a move towards the 200DMA at 0.8560 and the early November highs just under 0.8600.
In terms of fundamental catalysts, there hasn’t been much to drive the price action in EUR/GBP. BoE Governor Andrew Bailey didn’t reveal any new information to inform the BoE hike or no hike in the December debate – market participants/analysts remain split on this. Final Eurozone and UK November Manufacturing PMIs were broadly in line with the flash estimates released two weeks ago. Thursday sees the release of Eurozone Unemployment data for October, ahead of Final UK and Eurozone Service PMIs and ECB and more BoE speak on Friday.
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