- EUR/GBP attracts some buying on Monday, although the rally lacks continuation.
- The gloomy economic outlook from the Bank of England is behind the relative underperformance of the pound sterling.
- Recession fears act as a headwind against the Euro and limit significant gains in the pair.
The crossing EUR/GBP attracts some buying near the 0.8415 area and turns positive for the fourth day in a row on Monday. The pair rises to daily highs during the European session, although seem to have a hard time capitalizing on the move beyond the important 200-day SMA around the 0.8435-0.8440 area.
The Bank of England painted a particularly gloomy picture for the UK economy last week, and indicated that a prolonged recession would start in the fourth quarter. This is seen as a key factor in sterling’s relative underperformance and is lending some support to the EUR/GBP pair, although the rally lacks bullish conviction.
Investors continue concerned that the interruption of gas flows from Russia could trigger an energy crisis in the Eurozone, which could drag the region’s economy into a faster and deeper recession. This could continue to act as a common currency headwind and limit any significant upside for the EUR/GBP cross, warranting caution for the bulls.
Regarding the economic data, the Sentix index of investor confidence in the eurozone improved slightly, going from -26.4 in July to -25.2 in August. Also, the current situation slightly edged up to -16.3 in August from -16.5 previously and the expectations index came in at -33.8. However, this did not impress the bulls nor did it provide any momentum to the EUR/GBP cross.
The mixed fundamental background makes it prudent to wait for a continuation of strong buying before confirming that the EUR/GBP has bottomed near the 0.8340 region, or a multi-month low hit on 3rd August.
EUR/GBP technical levels
Source: Fx Street
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