- EUR/GBP remains under heavy selling pressure for the fifth day in a row on Thursday.
- The European gas crisis turns out to be a key factor weighing on the shared currency.
- The resurgence of the demand for dollars puts pressure on the British pound, which could give support to the cross.
The crossing EUR/GBP losing ground for the fifth day in a row on Thursday and continuing its recent sharp pullback from the 0.8585 area. The bearish trajectory remains uninterrupted throughout the middle of the European session and has dragged the cross to a three-month low around the 0.8345 area.
The shared currency’s relative underperformance comes amid renewed concern over the disruption of gas flows from Russia, which could trigger an energy crisis in the Eurozone. Indeed, Russian energy group Gazprom said flows through its main Nord Stream 1 gas pipeline to Germany had dropped to 20% of normal levels as of Wednesday due to maintenance. Although it appears temporary, the supply squeeze could drag the region’s economy into a faster and deeper recession.
Regarding economic data, Destatis reported this Thursday that inflation in Germany, measured by the Consumer Price Index (CPI), fell to 7.5% year-on-year in July from 7.6% previously. The Harmonized Index of Consumer Prices (HICP), the European Central Bank’s preferred gauge of inflation, rose to 8.5% in the same period, versus 8.1% forecast. However, this does not impress the euro bulls nor does it offer any support to the EUR/GBP cross.
On the other hand, the political instability in Italy, before the elections in September, raises concerns about the economic prospects of the region and could further weigh on the euro. This supports the prospects of a further short-term depreciation move for the EUR/GBP cross. On the other hand, the British pound is under pressure from the resurgence in demand for US dollars and could help limit deeper losses. However, the fundamental backdrop appears to be leaning heavily in favor of the bearish traders.
Technical levels
Source: Fx Street
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