- EUR/GBP regains positive traction and pulls away from the one-week low reached on Tuesday.
- Macroeconomic data from the Eurozone, mostly better than expected, offer some support for the shared currency.
- The appearance of some selling around the British pound contributes to the intraday rise.
- Efforts by the new UK Prime Minister to ease the cost of living crisis and bets on rate hikes from the Bank of England could cap gains.
The crossing EUR/GBP receives fresh offers on Wednesday and breaks a two-day losing streak to hit a one-week low around the 0.8565 area hit the day before. The cross increases its intraday gains and reaches a new daily high, around the 0.8630-0.8635 area during the first half of the European session.
The relative performance of the shared currency against its British counterpart comes in a context in which economic releases from the Eurozone have been, for the most part, better than expected. According to official data published on Wednesday, German industrial production fell by 0.3% in July, compared to the 0.4% decline expected. Additionally, Eurozone GDP was revised upwards to show 0.8% growth during the second quarter of 2022, versus 0.6% previously estimated.
Russian President Vladimir Putin declared on Wednesday that the Nord Stream 1 is practically closed, adding that we can launch the Nord Stream 2 pipeline if necessary. This, to some extent, helps alleviate concerns about an extreme energy crisis in Europe and provides additional support for the common currency. This, along with the appearance of some selling around the British pound, provides an additional boost to the EUR/GBP cross.
That said, efforts by new UK Prime Minister Liz Truss to offset the ongoing UK cost of living crisis and bets on an aggressive rate hike by the Bank of England could limit losses. of the pound sterling. This, in turn, could limit any significant gains in the EUR/GBP cross. Investors may also refrain from making aggressive bets and prefer to stay on the sidelines ahead of the European Central Bank’s monetary policy meeting on Thursday.
Technical levels
Source: Fx Street
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