- EUR / GBP caught some aggressive offers on Thursday and rallied above 0.8600.
- The ECB switched to a symmetric inflation target of 2%, but did not refer to excess inflation.
- A resistance break at the downtrend line has already set the stage for additional gains.
The crossing EUR/GBP It was based on its strong intraday gains and returned to close to the monthly highs around the 0.8615 region during the middle of the European session.
Having found decent support near the 0.8535 region, the EUR / GBP cross caught some aggressive offers on Thursday and reversed its losses recovered over the last week or so. The relative outperformance of the shared currency comes amid the announcement of the results of the European Central Bank’s monetary strategy review.
The ECB moved to a symmetric inflation target of 2%, contrary to a ceiling at that level, in line with market expectations. The ECB, however, did not make any specific reference to tolerating an inflation overshoot. This was seen as a possible disappointment for some investors seeking guarantees for the continuation of expansionary monetary policy.
There was little reaction in the bond market, although the lack of commitment to guarantee stimulus until well into the recovery led to a short-hedging movement around the common currency. This, along with some selling around the British pound, contributed to the strong intraday rally in the EUR / GBP pair to levels above 0.8600.
With the last leg up, the EUR / GBP cross now appears to have confirmed a short-term bullish breakout through short-term downtrend line resistance extending from April highs. Some subsequent buying will reaffirm the constructive outlook and set the stage for a move towards intermediate resistance near the 0.8645-50 area.
Technical levels
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