EURGBP around 0.8750, lacks bullish conviction

• The EURGBP gains some positive traction for the second day in a row, although there is no follow-up.
• The dollar’s modest rebound weighs on the common currency and acts as a headwind for the cross.
• Additionally, traders are wary of this week’s UK macro data and Chancellor Hunt’s remarks.

The crossing of EURGBP rises for the second day in a row on Monday and maintains its modest intraday gains during the European session. The crossing is located currently around 0.8750, although lacks follow-up buying or bullish conviction.

The common currency continues to receive some support from Expectations for a more aggressive tightening of the European Central Bank’s policy (ECB). The pound sterling, on the other hand, looks hurt by gloomy prospects for the UK economy. Indeed, the National Institute for Economic and Social Research (NIESR) forecasts UK GDP growth to be flat in the fourth quarter and notes that the risk of contraction remains high. This, in turn, is seen as lending some support to the EURGBP cross.

Having said that, prospects of further interest rate hikes by the Bank of England act as a tailwind for sterling. Elsewhere, the US dollar’s modest recovery from its near three-month low puts some pressure on the Euro and limits any significant gains in the EURGBP cross, at least for now. Traders also appear reluctant to open aggressive positions ahead of this week’s important UK macro data: Tuesday’s monthly employment report and Wednesday’s CPI report.

Investors will continue to watch hearings on the BoE’s Monetary Policy Report on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. All of this will influence short-term sentiment around the British pound and determine the next directional move for the EURGBP cross. Meanwhile, the cross looks more likely to consolidate in a range in the absence of market-relevant economic releases from either the Eurozone or the UK.

EURGBP technical levels