EUR/GBP hits fresh three-month all-time highs above 0.6860

• The euro appreciates for the second day in a row and hits a three-month high at 0.8875.
• The pound’s losses are weighed down by the gloomy economic outlook in the UK and hopes of a slower tightening from the Bank of England.
• EUR/GBP appreciates around 5.5% in 2022, with the pound hit by the UK political drama.

The euro finally managed to break through the 0.6860 resistance zone on Friday, extending its rebound from session lows at 0.6820 to fresh three-month record highs at 0.6870 so far. The common currency is benefiting from moderate weakness in the British pound in a weak pre-holiday session.

The pair has shaken off mild risk aversion sparked by concerns over the consequences of the major COVID-19 outbreak in China and the escalation of tensions in Ukraine, to appreciate for the second day in a row.

Elsewhere, the pound continues to be offered broadly, weighed down by the gloomy economic outlook in the UK and hopes that the Bank of England will slow its tightening path in the coming months.

The pound is about to close its worst year since 2016

The EUR/GBP pair will close the year with an appreciation of 5.5%, favored by the general weakness of the pound in 2022. The pound sterling was hit hard by political uncertainty during the last months of Boris Johnson’s term and the Liz Truss tax reform fiasco.

Johnson’s Downing Street successor’s tax cut plan caused a record plunge in the pound in October and prompted the Bank of England to intervene to prevent a credit crunch.

The pound firmed up a bit in the fourth quarter as the election of Rishi Sunak calmed markets, although the negative economic outlook coupled with rising inflation keep sterling buyers at bay.

technical levels