- EUR/GBP gained strong positive traction and soared past a two-week high on Thursday.
- The ECB raised interest rates by 50 basis points and provided a nice boost to the shared currency.
- Investors are now waiting for ECB President Lagarde’s press conference for a significant boost.
The common currency strengthened across the board after the European Central Bank announced its policy decision, raising the cross EUR/GBP to a maximum of two weeks. The last time the cross was seen was in the 0.8575-0.8580 zone, up nearly 1% on the day.
As expected, the Governing Council of the ECB took a larger than expected first step on its interest rate normalization path, choosing to raise base interest rates by 50 basis points, compared to the 25 forecast. Monetary policymakers considered the early exit from the negative interest rate regime to be appropriate due to higher-than-expected inflation.
The ECB also unveiled a new tool called the “Transmission Protection Instrument” to prevent rising borrowing costs from sparking a debt crisis amid ongoing political turmoil in Italy. The central bank said further details of the anti-fragmentation toll would be announced separately during the post-meeting press conference.
Therefore, traders will now take a close look at ECB President Christine Lagarde’s comments, which will play a key role in the common currency’s influence and provide a further boost to the EUR/GBP cross. Meanwhile, the resumption of Russian gas supplies via the Nord Stream 1 pipeline and a large rate hike from the ECB should continue to support the euro.
Technical levels
Source: Fx Street
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