- EUR/GBP consolidates its recent losses to one-month lows.
- The repositioning before the ECB decision offers support to the euro.
- The lack of continuation buying warrants some caution for the bulls.
The crossing EUR/GBP oscillates between timid gains and minor losses and remains stuck in a range around the 0.8300 level during the first half of the European session on Thursday.
After an initial drop to one-month lows, the EUR/GBP did capture some intraday buying on Thursday, though rally attempt lacked bullish conviction. The relative outperformance of the common currency lacked any obvious fundamental catalyst and could only be attributed to some repositioning before the European Central Bank meeting.
Since the ECB is now more concerned about inflation than growth, the process of normalizing monetary policies is expected to continue unless the economic situation deteriorates significantly. The central bank has the option to end the quantitative easing (QE) program immediately or change guidance to suggest that interest rates could rise as QE declines.
Having said that, concerns about the possible economic fallout from the crisis in Ukraine could prevent the ECB from announcing any major changes in its monetary policy. Aside from this, some continuation buying around the British pound, reinforced by the current US dollar pullback slide, acted as a headwind for the EUR/GBP cross and capped any significant upside.
The mixed fundamental backdrop warrants some caution for aggressive investors before positioning themselves for a strong short-term direction. From a technical perspective, a weakness below the static support at 0.8285 will be seen as a new trigger for the bears. This, in turn, would set the stage for an extension of the recent retracement of the yearly high hit in March.
EUR/GBP technical levels
Source: Fx Street
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