- EUR / GBP witnessed a sea change and rallied over 50 pips from weekly lows.
- The nervousness of COVID-19 and Bailey’s dovish comments weighed heavily on the British pound.
- An upward revision of the euro zone manufacturing PMI benefited the shared currency.
The crossing EUR/GBP It maintained its strong tone offered in the middle of the European session, although it has fallen a few pips from the highs of more than two weeks touched earlier this Thursday. The cross was last seen trading around the 0.8595 region, up 0.30% on the day.
After an initial dip to weekly lows, the EUR / GBP cross caught some aggressive offers and rallied over 50 pips from the horizontal support at 0.8565-60. The strong intraday rally was solely sponsored by the emergence of strong selling around the British pound following comments from Bank of England Governor Andres Bailey.
During a speech scheduled for Thursday, Bailey noted that the central bank expects the cost of living to rise in the coming months, but that should only be short-lived. This, coupled with a downward revision to the UK manufacturing PMI and concerns about the spread of the most contagious Delta variant of the coronavirus, weighed on the British pound.
On the other hand, the shared currency benefited from an upward revision of the manufacturing PMI figures and an unexpected drop in the unemployment rate in the euro zone during May. The combination of support factors provided a strong boost to the EUR / GBP cross, although the bulls struggled to capitalize on the move or find acceptance above 0.8600.
From a technical perspective, the EUR / GBP cross, thus far, has repeatedly failed to decisively break a resistance marked by a two-month-old downtrend line resistance. This makes it prudent to wait for some solid follow-up buying before traders start positioning for an extension of the recent positive move from the two and a half month lows.
Technical levels
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