EUR/GBP sits near its highest level since September, just below 0.8900 ahead of BoE/ECB

The EUR/GBP cross gains traction for the fourth successive day and climbs to the 0.8900 neighbourhood or its highest level since late September on Thursday.

The shared currency continues to draw support from expectations for additional jumbo rate hikes by the European Central Bank (ECB) in the coming months. The bets were reaffirmed by the recent hawkish commentary by several ECB officials, which, in turn, acts as a tailwind for the EUR/GBP cross. The British Pound's relative underperformance could further be attributed to speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle.

That said, the prevalent US Dollar selling bias lends some support to the Sterling Pound. Furthermore, signs of inflationary pressures in the Eurozone might have forced investors to scale back expectations for a more aggressive policy tightening by the ECB. This, along with reluctance ahead of the key central bank event risk, keeps a lid on any further gains for the EUR/GBP cross. This warrants some caution before positioning for an extension of the ongoing move-up.

Both the BoE and the ECB are scheduled to announce their policy decisions during the mid-European session this Thursday. The market focus, however, will be on clues about the future rate hike path, which will determine the next leg of a directional move for the EUR/GBP cross. Nevertheless, the fundamental backdrop favours bullish traders, though a sustained move beyond the 0.8900 round-figure mark is needed to support prospects for a further near-term appreciating move.

Technical levels to watch