EUR/GBP extends post-ECB recovery and hits 1-month highs around 0.8770

• EUR/GBP gains ground for the second day in a row and hits highs in almost a month.
• The ECB’s aggressive outlook continues to support the Euro and extend support to the cross.
• Dismal UK retail sales data weighs on sterling and provides an additional boost.

The crossing EUR/GBP extends the previous day’s strong positive move and gains traction for the second day in a row on Friday. The momentum extends through the first half of the European session and lifts the pair to a high of almost a month, around the region of 0.8770 in the last hour.

The most aggressive stance adopted on Thursday by the European Central Bank (ECB) continues to support the common currency, which turns out to be a key factor acting as a tailwind for the EUR/GBP cross. In fact, the ECB indicated that it will have to raise borrowing costs further to control inflationwhich is still too high and is expected to remain above target for longer.

Also, the publication on Friday of the preliminary PMI indices of the Eurozone, better than expected and which suggest that the region’s economic recession will ease in December, offer additional support to the Euro. Sterling, for its part, is under pressure from disappointing domestic data, which shows that retail sales fell again in November and fuel concerns that the economy has already entered a protracted recession.

Aside from the fundamental factors mentioned, continued strength beyond a strong breakout point of previous support around the 0.8700 level seems to have triggered some technical buying. However, any further move higher is more likely to be met with stiff resistance near the 0.8800-0.8810 zone. This latter region should act as a pivot point, which if breached will be seen as a new trigger for bulls.

EUR/GBP technical levels