EUR/GBP rebounds from 0.8400, but remains significantly lower

• EUR/GBP rises on Friday after a drop to the 0.8400 area.
• The ECB’s reassuring talking points are helping to restore sentiment, but only slightly.
• The BoE rate decision looms next week, but no rate moves are expected yet.

EUR/GBP fell to a new 22-month low on Friday, touching 0.8400 before finding a slight recovery that still leaves the pair struggling at the bottom of an accelerated three-month decline from April peaks above 0.8600. European political turmoil continues to weigh on the Euro as France heads into a two-round snap election on June 30 and July 7, and sterling traders prepare to await the Bank of England (BoE) next week.

European Central Bank (ECB) policymakers have been making the rounds on Friday, attempting to calm market sentiment as the Euro broadly underperforms as the worst-performing of the major currencies this week. French President Emmanuel Macron has dissolved the French government and pushed the country into an early election in an attempt to halt the rise of right-wing contender Marine Le Pen, who won a surprise victory in the European parliamentary elections.

With President Macron’s support evaporating from a population rebelling at the polls against unpopular fiscal policies, Le Pen’s platform of deep tax cuts and lower retirement ages has boosted the contender, who has failed in three attempts. separated by the French presidency since 2012, to try for the fourth time. Financial markets have become cautious about financial stability stemming from political upheaval in France, as populist measures aimed at buying votes could represent a significant deficit for the key European Union member.

On the Sterling side, GBP traders are preparing for the long wait for the UK Consumer Price Index (CPI) update scheduled for Wednesday, followed by a new BoE rate decision next Thursday. The BoE’s Monetary Policy Committee (MPC) last voted seven to two to keep rate cuts at 5.25%, and while no rate moves are expected, investors will be watching for any further shift from ‘hold’ votes. ‘ to ‘trim’.

EUR/GBP technical outlook

EUR/GBP fell to a new 22-month low on Friday, testing the 0.8400 area before finding intraday technical support and bouncing towards the 0.8440 region. Market momentum is firmly tilted to the bearish side with the pair falling -1.2% from the June peak near 0.8540.

The pair is on track to close lower for the fifth consecutive week, and the weakness has dragged EUR/GBP down -2.85% from the 2024 high. A bullish recovery towards the 200-day EMA at 0.8460 will likely return on the downside, and sellers will definitely look to push the pair back below the 0.8400 area.

EUR/GBP daily chart