EUR/GBP finds resistance at 0.8860 and returns to the 0.8800 zone

• Euro pared gains after failure at 0.8860 resistance zone.
• The pound sterling depreciates across the board in a context of weak dollar.
• Over the longer term, the pair remains positive, with the pound weighed down by the Bank of England’s dovish rate hike.

The euro has failed to break above the 0.8860 resistance zone on Wednesday. The EUR/GBP It fell back to 0.8800 as of this writing, reversing Tuesday’s gains, and is on pace to end a five-day winning streak.

The pound rebounds in a quiet session in the markets

The pound pared losses on Wednesday, underpinned by a slight recovery in GBP/USD, as the dollar lost ground broadly in a low volume trading session and amid subdued risk appetite.

In the absence of key macroeconomic releases, investors remain moderately optimistic after the news that the Chinese authorities will end restrictions on the entry of travelers, which is expected to accelerate the economic recovery in the main Asian economy.

However, from a longer-term perspective, the pound remains on the back foot, with EUR/GBP up nearly 3% in the past two weeks.

The Bank of England hurt GBP demand after slowing its tightening cycle after its December policy meeting. The BOE raised rates 0.5%, following November’s 0.75% hike, and two of the nine committee members voted to keep rates unchanged. This has fueled speculation about a softer normalization phase in 2023 and possibly a lower peak in interest rates.

Technical levels to watch