EUR/GBP bounces from two-week lows towards 0.8850

• ECB officials are still talking about a rise in interest rates.
• The euro is supported by rising euro zone bond yields.
• EUR/GBP is approaching the critical resistance zone of 0.8850 again.

EUR/GBP rises for the second day in a row, after hitting its lowest level in two weeks on Monday. The cross rose from 0.8769 and reached a high on Tuesday at 0.8846, supported by a stronger euro across the board.

Euro backed by yields

On Tuesday, the euro advanced against the pound and the Swiss franc. Rising Eurozone bond yields are helping the common currency. The 10-year German bond yield stands at 2.29%, the highest level in two days, up 2.75%.

Officials at the European Central Bank continue to speak in a hawkish tone, while concerns about the health of the economy remain in the UK. UK fundamentals are under discussion at the Bank of England’s Monetary Policy Committee.

“As UK fundamentals continue to be characterized by recession, high inflation, low investment growth and weak productivity, we continue to expect EUR/GBP to approach 0.90 on a 6-9 month outlook.” That being said, we will continue to closely monitor the evolution of the protocol,” explain the Rabobank analysts.

The chart shows titrated risks to the upside in EUR/GBP after the cross managed to hold above the 20-day SMA (today at 0.8785). Upsides remain capped by the critical 0.8850 resistance area. A daily close above 0.8850 would open the door for more short-term gains.

EUR/GBP Technical Levels