- EUR/GBP rose to a monthly high on Monday, although it struggled to capitalize on the move.
- Dismal UK macro data on Friday continued to weigh on the British pound and extended support.
- Sustained USD buying undermined the shared currency and kept any significant upside limited.
The crossing EUR/GBP it pulled back a few pips from the monthly high reached during the mid European session and was last seen trading modest gains around the 0.8425 region.
After an early drop below 0.8400, the EUR/GBP regained positive traction for the fifth day in a row on Monday and built on last week’s strong move higher. Disappointing UK macro data released on Friday indicated the national economy is under pressure from rising cost of living. This, in turn, was seen as a key factor that continued to weigh on the British pound and acted as a tailwind for cross prices.
On the other hand, aggressive comments from some ECB policymakers contributed to the shared currency’s relatively outperformance against its British counterpart. It should be remembered that the ECB Vice President, Luis de Guindos, had said that a rate hike is possible in the second half of the year. Furthermore, ECB Governing Council member Pierre Wunsch suggested a likely rate hike in July and also anticipated that rates could turn positive as soon as this year.
Also, Joachim Nagel, President of the Deutsche Bundesbank, noted that the ECB could raise interest rates early in the third quarter. However, ECB President Christine Lagarde said the central bank may need to cut its growth outlook further amid concerns about the fallout from Russia’s invasion of Ukraine. This coupled with sustained US dollar buying prevented Euro bulls from making further bets and capped the EUR/GBP cross.
Even from a technical perspective, the positive intraday move faltered just ahead of a technically significant 200-day SMA, currently around the mid-0.8400, which should now act as a pivotal point. This makes it prudent to wait for sustained strength beyond that barrier before positioning for any further near-term appreciation moves amid the absence of relevant economic releases in the market.
Technical levels
Source: Fx Street
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