- The pound weakened after UK growth data.
- The euro buoyed by European bond yields.
- EUR/GBP bullish but capped as long as it remains below 0.8600,
EUR/GBP climbed to 0.8592, reaching the highest level since May 12, against a backdrop of negative data from the UK, rising yields in Europe and high risk aversion. The cross is still unable to overcome and assert itself on 0.8600.
After the meeting of European Central Bank (ECB) of last week, in the current one it will be the turn of the Bank of England (BoE) which is expected to raise the interest rate by 25 basis points to 1.25%. In the market, a certain possibility of a higher rise is discounted. The pound lost steam on Monday after May growth data, which showed a 0.3% contraction against the consensus of a 0.1% rise.
Brexit could return to the front pages, with the introduction of a bill in the British parliament that would allow the government to change the agreement unilaterally.
The euro is favored on Monday against certain currencies, as European bond yields rise to the highest in years. This comes after the ECB’s message last week where it explained that it will raise rates by 25 basis points in July.
ANDEUR/GBP’s bullish tone has been eroded in recent hours after losing steam before 0.8600. That level remains critical and a confirmed break above it would leave the euro poised for further gains. Failing that, we would expect the cross to continue in the range with key support at 0.8485.
Technical levels
Source: Fx Street
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