EUR/GBP spikes to fresh session tops as the ECB presser gets underway

   •  EUR gains some ground on hawkish comments by Draghi.
   •  Some concerns over recent FX volatility capping gains.

The EUR/GBP cross extended its modest rebound from 7-month lows and spiked to fresh session tops, around 0.8725 region as the ECB presser got underway.

The shared currency gained some positive traction, lifting the spot further away from its lowest level since early June 2017, after the ECB President Mario Draghi said that the EZ economy has accelerated more than expected, which gives more confidence that inflation will head toward 2% target.

Further gains, however, remained limited as Draghi reiterated that QE will run until the governing council sees sustained inflation adjustment, while the recent exchange rate volatility could possibly a source of uncertainty for short term price stability. 

Investors would continue to scrutinize Draghi’s comments for any clues over the central bank’s intention to unwind its massive monetary stimulus and further monetary policy stance. 

Technical levels to watch

Any further recovery is likely to confront strong resistance near the 0.8735-40 region, above which a bout of short-covering could lift the cross back towards the 0.8780-85 supply zone.

On the flip side, a decisive break below the 0.8700 handle has the potential to continue dragging the cross further towards June 2017 low support near mid-0.8600s en-route 0.8630 level and the 0.8600 handle.