EUR/GBP reaches a new weekly high and tests resistance in the 0.8870 zone

• EUR/GBP rises for the third day in a row and hits a new weekly high on Wednesday.
• Dovish Bank of England expectations weigh on sterling and continue to support momentum.
• Recent hawkish rhetoric from the ECB underpins the euro and supports further earnings prospects.

The EUR/GBP cross consolidates its good rebound from the lows of more than two weeks and gains traction for the third day in a row on Wednesday. Prices made fresh weekly highs in the European session, and are testing the strong resistance zone at 0.8865-0.8875.

The British pound continues its relative underperformance, which, coupled with a modest rally in the common currency, acts as a tailwind for the EUR/GBP cross. The gloomy outlook for the UK economy has fueled speculation that the bank of england (BoE) is nearing the end of the current rate hike cycle. This, in turn, is seen as a key factor weakening the British pound.

In addition, the hard-line rhetoric of various government officials European Central Bank (ECB) benefits the euro and lends more support to the EUR/GBP cross. Indeed, Robert Holzmann, a member of the ECB’s Governing Council, declared on Wednesday that rates will have to rise much more to reach levels restrictive enough to ensure a timely return of inflation to target.

In the absence of market-relevant economic releases, both in the UK and the Eurozone, the fundamental background supports the prospects for further appreciation in the near term. Bulls, however, could wait for a sustained move beyond the 0.8865-0.8875 barrier before making further bets. The EUR/GBP cross could then try to recapture the psychological area of ​​0.9000 in the short term.

technical levels