• EURGBP lacks firm intraday direction and remains trapped in a tight range.
• Rumors of aggressive ECB tightening underpin the Euro and offer support to the pair.
• The gloomy outlook around the BoE could weigh on sterling and favor the pair’s bulls.

The crossing EURGBP struggles to capitalize on the previous day’s modest gains and oscillates in a tight range, just above the 0.8700 level at the start of the European session on Wednesday.

The rumors about a more aggressive tightening of the European Central Bank’s monetary policy (ECB) continue to benefit the common currency and offer support to the EURGBP cross. Indeed, several ECB policymakers have claimed that higher rates needed for longer to bring double-digit inflation in the euro zone down to its 2% target. This, in turn, pushes the rate-sensitive German 2-year bond yield to its highest level since December 2008 and is seen as acting as a tailwind for the Euro.

The British pound, for its part, is supported by the recent fall in the US dollar and limits the EURGBP cross. Having said that, the gloomy outlook from the Bank of England on the UK economy should weigh on the British pound and support the prospects of some rise in the cross. It should be remembered that the British central bank expects the recession to last throughout 2023 and the first half of 2024, while indicating a lower terminal rate than what is valued in the markets.

The fundamental background suggests that the path of least resistance for the EURGBP cross is to the upside and any slip below the 0.8700 round level could be seen as a buying opportunity. Bulls, however, could wait for sustained strength beyond the 0.8775-0.8780 resistance zone before opening new positions amid the absence of market-relevant economic releases. Market attention now turns to the release of the UK’s third quarter preliminary GDP report on Friday.

EURGBP technical levels