- Euro rises across the board as Eurozone yields move higher.
- Thursday’s ECB meeting may trigger volatility.
- EUR/GBP is moving sideways, with no clear direction.
The EUR/GBP rises on Wednesday, thanks to a stronger euro across the board. The cross rose from below 0.8500 and reached a high of 0.8563. It then reversed and found support at 0.8550.
The euro gained momentum as German bond yields topped 1.35% for the first time since 2014. The move comes ahead of the European Central Bank (ECB) meeting on Thursday. The ECB is expected to announce the end of the asset purchase program and suggest rate hikes at upcoming meetings.
Analysts at Brown Brothers Harriman note that ECB tightening expectations have risen ahead of Thursday’s decision. “The WIRP suggests that the July 21 lift is still fully priced in. However, markets are pricing in a possible 50 basis point move at either the September 8 or October 27 meetings, followed by a 25 basis point hike on December 15, which would take the official interest rate to 0.75% at the end of the year, compared to the previous 0.5%.
The ECB meeting, the political drama in the UK and a plan by Prime Minister Johnson to rewrite parts of Brexit all guarantee volatility ahead for EUR/GBP in the coming sessions.
Above 0.8500, below 0.8600
EUR/GBP has been trading in a wide range since the end of May, finding resistance below 0.8600 and being rejected below 0.8500. A daily close clearly above 0.8600 should open the door for more gains, initially to test the May high at 0.8618. On the other hand, a consolidation below 0.8500 would weaken the Euro, leaving the cross vulnerable to a decline to 0.8400.
Technical levels
Source: Fx Street
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