- EUR / GBP recorded a modest rebound from the 18-month lows hit earlier this Monday.
- The recovery attempt lacked an obvious fundamental catalyst and follow-through.
- A positive Brexit development, the aggressive BoE could prop up GBP gains and limit gains.
The crossing EUR/GBP it extended its side consolidation price action and remained confined to a range below 0.8450 during the first half of the European session.
The cross halted its recent downward trajectory to the lowest level since February 2020 and made a modest bounce from the 0.8425-20 region on the first day of a new trading week. The rally lacked an obvious fundamental catalyst and was led solely by some profit-taking by bearish traders amid slightly oversold conditions.
However, a combination of factors, so far, has not helped the EUR / GBP cross to register a significant recovery. Resurgent demand for the US dollar acted as a headwind for the shared currency. Apart from this, the positive development of Brexit and aggressive signals from the Bank of England collaborated to end the rise of the crossing.
After days of mounting tensions, the European Union agreed to remove most controls on goods and medicines coming into Northern Ireland from the rest of the UK. Additionally, Bank of England Governor Andrew Bailey warned that rising energy prices mean inflation will last longer and monetary policy cannot solve supply-side problems.
Bailey further added that the Bank of England will and must act if we see a risk, particularly to medium-term inflation expectations. This, in turn, acted as a tailwind for the British pound and kept any significant recovery for the EUR / GBP cross limited amid the absence of economic data on market movement, either from the UK or the zone. euro.
From a technical perspective, the lack of a strong follow-up buy and range-bound price action could still be classified as a consolidation phase. This, in turn, suggests that the recent downtrend may still be far from over and warrants some caution before positioning for any significant appreciation movement.
Technical levels
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