- EUR/GBP keeps pullback from monthly top, grinds lower of late.
- ECB’s Muller sounds mixed on APP boost but Fed’s Powell stole the limelight.
- UK inflation expectations jumped to record top in September but BOE policymakers may keep rates, asset purchases unchanged.
- Brexit woes, UK PM Johnson’s US visit and China’s Evergrande add to the watch list.
EUR/GBP holds onto the previous day’s U-turn from the monthly peak near 0.8580 during the Asian session on Thursday. Even so, the cross-currency pair remains sluggish ahead of the key Bank of England (BOE) monetary policy meeting, as well as the preliminary readings of September PMIs from the Eurozone.
Improvement in the Eurozone Consumer Confidence for September, from -5.3 to -4.0, versus -5.0 expected, joined initially hawkish comments from European Central Bank (ECB) Governing Council member Madis Muller to favor the EUR/GBP bulls.
Also on the positive side was the UK PM Boris Johnson’s acceptance that the UK-US trade deal is far. The reason could be linked to the deadlock over the Northern Ireland (NI) protocol.
It’s worth noting that the US dollar’s jump on Fed Chair Jerome Powell’s tapering announcement and additional mixed comments from the ECB’s Muller pulled the quote back from the one-month high, forming a double-top chart pattern.
Amid these plays, stock futures remain up, keeping post-Fed gains, while the US 10-year Treasury yields struggle for fresh direction after declining the previous day.
Looking forward, the Bank of England’s (BOE) Quarterly Inflation Report (QIR) will be important for the EUR/GBP pair traders even as the “Old Lady” isn’t expected to alter the current monetary policy. That said, the UK inflation expectations, per Citi/YouGov survey, jumped to the record high in September and backs the recently hawkish policymakers.
Read: Bank of England Preview: Action to revolve around tapering prospects
Before the BOE drama, flash PMIs from Germany and Eurozone, likely to come in stronger, may help the EUR/GBP to mark another attempt in crossing the 0.8613 hurdle.
Additionally, headlines concerning China and covid, not to forget, will also be important to watch amid a likely busy day.
Technical analysis
Wednesday’s bearish candle near the monthly top hints at EUR/GBP pullback. Other than the “double top” formation around 0.8613, a two-month-old resistance line near 0.8595 also challenges the pair buyers. Meanwhile, the mid-month top near 0.8560 lures short-term bears.
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