EUR/GBP surges back closer to monthly tops, beyond 0.8600 mark

The EUR/GBP cross built on its strong intraday gains and jumped back closer to monthly tops, around the 0.8615 region during the mid-European session.

Having found a decent support near the 0.8535 region, the EUR/GBP cross caught some aggressive bids on Thursday and reversed its losses recovered over the past one week or so. The shared currency's relative outperformance comes amid the announcement of the results of the European Central Bank's monetary strategy review.

The ECB shifted to a symmetric inflation target of 2%, contrary to a ceiling at that level, in line with market expectations. The ECB, however, made no specific reference to tolerating an inflation overshoot. This was seen as a possible disappointment for some investors looking for assurance for the continuation of expansionary monetary policy.

There was little reaction in the bond market, though the lack of commitment to ensure stimulus well into the recovery prompted some short-covering move around the common currency. This, along with some selling around the British pound, contributed to the EUR/GBP pair's strong intraday rally to levels back above the 0.8600 round-figure mark.

With the latest leg up, the EUR/GBP cross now seems to have confirmed a near-term bullish breakout through a short-term descending trend-line resistance extending from April swing highs. Some follow-through buying will reaffirm the constructive outlook and set the stage for a move to an intermediate resistance near the 0.8645-50 area.

Technical levels to watch