- EUR / GBP has been in a range between 0.8550 and 0.8580 for most of the last 48 hours.
- Looking ahead, Thursday’s ECB meeting and critical data on Friday in the UK and the euro zone could turn things around.
The EUR/GBP has spent most of the last 48 hours hanging around between the levels of 0.8550 and 0.8580 and it is currently trading practically unchanged on the day near 0.8560. Range trading is not surprising given the lack of fundamental catalysts relevant to the eurozone or related to the United Kingdom so far this week.
The only news of real importance has been the fact that the EU is preparing to take the UK to court for its recent unilateral actions to extend customs exemptions between the mainland and Northern Ireland. For now, markets seem to be viewing this story as political theater rather than anything that could significantly damage future UK-EU trade relations.
However, things are set to improve for EUR / GBP before the end of the week. Thursday, the ECB publishes its latest monetary policy decision and a lot of critical data is released on Friday (Monthly GDP, industrial production and trade) corresponding to the month of January for the United Kingdom, as well as aggregate industrial production figures for January for the euro zone. These economic events are likely to inject some life into the EUR / GBP cross.
However, keep in mind that many strategists remain bearish on the EUR / GBP and forecast that, for the next few sessions, a test and a break below the recent lows just below 0.8540 is still a great probability, as the UK’s vaccine launch continues to outpace that of the EU (and set to accelerate further in the coming weeks), meaning a faster and safer economic reopening is likely during the summer, followed by a faster and more aggressive economic recovery than that seen in the EU. Meanwhile, the Bank of England is currently viewed as more optimistic than the ECB, with the BoE governor touting his anti-negative interest rate stance this week and ECB officials showing much higher levels of concern regarding rising yields of government bonds (increasing the margin for an acceleration of the pace of asset purchases).
EUR / GBP technical levels
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