- EUR/GBP attracted some buying on the dips on Friday and reversed some of the sharp pullback overnight.
- The euro drew support from comments from ECB policymakers hinting at an interest rate hike in July.
- Concerns about the economic fallout from the Ukraine crisis prevented the bulls from making further bets.
The crossing EUR/GBP it maintained its offered tone during the first half of the European session and was last seen near the daily high around the 0.8525 region.
Following the overnight reversal from the 0.8615-0.8620 zone, or the highest level since September 2021, the EUR/GBP cross attracted fresh buying near the psychological 0.8500 mark on Friday. The shared currency’s relative outperformance comes amid aggressive comments from ECB policymakers hinting at an interest rate hike in July.
On the other hand, the British Pound was pressured by weaker UK macro data on Thursday, which reaffirmed a gloomy economic outlook and suggested the Bank of England’s rate hike cycle may be coming to a halt. This was seen as another factor that acted as a tailwind for the EUR/GBP cross, although the rally lacked bullish conviction.
Concerns that the Eurozone economy would suffer more from the Russian-Ukrainian war prevented the bulls from making aggressive bets on the EUR/GBP cross. In the latest developments, Ukraine announced that it would suspend the transit of Gazprom gas on its territory. On the other hand, Finland confirmed that it would apply to join NATO “without delay”.
Sweden is also expected to follow suit amid security concerns after Russia invaded Ukraine. The Kremlin reacted by warning that it will be forced to take “military-technical” measures in retaliation. Given its proximity, investors remain concerned about the spillover effect that could prevent the European Central Bank from raising interest rates.
From a technical perspective, the appearance of some nose-buying near a falling trendline resistance breakpoint, now turned support, favors bullish traders. The mixed fundamental backdrop, however, warrants some caution before positioning for any firm near-term directions amid the absence of any relevant market-moving economic releases.
Technical levels
Source: Fx Street
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