- EUR/GBP regains positive traction on Thursday and is back close to the overnight high.
- The gloomy outlook for the Bank of England is seen as a key factor in the sterling’s underperformance.
- The weakness of the dollar after the US CPI benefits the euro and continues to support the intraday move higher.
The crossing EUR/GBP gets new offers on Thursday and continues its positive intraday movement during the first half of the European session. The momentum sees spot prices halving back above 0.8400 in the last hour, approaching two-week highs hit the previous day.
The gloomy outlook from the Bank of England continues to act as a key factor in the relative underperformance of the British pound and offers some support to the EUR/GBP cross. It should be remembered that the UK central bank painted a particularly bleak picture last week, warning that a prolonged economic recession would begin in the fourth quarter.
Elsewhere, the shared currency receives some support from softer CPI-induced US dollar weakness. This provides additional momentum to the EUR/GBP cross and contributes to the positive intraday move. However, concerns about Europe’s energy supply, which could drag the Eurozone economy into a faster and deeper recession, could cap cross gains.
In the latest development, supplies of Russian oil to three European countries via Ukraine were suspended, as Western sanctions prevented the latter from accepting transit fees. This makes it prudent to wait for a strong sell-off before confirming that the EUR/GBP has formed a short-term bottom and positioning for any further appreciation moves.
No major economic data will be released on Thursday, neither from the Eurozone nor from the UK. Therefore, the market’s attention is now focused on the UK’s preliminary Q2 GDP report due out on Friday. The data will play a key role in influencing short-term sentiment surrounding the British pound and will provide a further directional boost to the EUR/GBP cross.
Technical levels
Source: Fx Street
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