- A combination of factors assisted EUR/GBP to move further away from multi-month lows.
- Brexit-related uncertainties, softer UK macro data continued undermining the British pound.
- The euro benefitted from subdued USD demand and remained supportive of the move up.
The selling bias surrounding the British pound pushed the EUR/GBP cross to two-day tops, around the 0.8940 region during the early European session on Thursday.
The cross built on the previous day’s intraday bounce from the 0.8860 region, or five-month lows and continued gaining traction through the first half of the trading action on Thursday. As investors awaited fresh Brexit updates, the British pound witnessed some selling the second consecutive session and was further pressured by softer-than-expected UK GDP growth figures.
According to the data published by the Office for National Statistics, the UK economy expanded by 1.1% in September and 15.5% during the third quarter of 2020. The reading was slightly below consensus estimates pointing to a growth of 1.5% MoM and 15.8% QoQ. Separately, the UK Industrial and Manufacturing Production figures for September also fell short of market expectations.
The British pound remained depressed and had a rather muted reaction to the latest comments by the Bank of England Governor, Andrew Bailey. During a scheduled speech at the Financial Times Global Digital Conference, Bailey said that they don’t see a great need for yield curve control and refrained from providing any specific timing to adopt negative interest rates.
On the other hand, the shared currency managed to gain some positive traction on the back of a mildly softer tone surrounding the USD. This, in turn, was seen as another factor driving the EUR/GBP cross higher. That said, the uptick lacked any strong follow-through and warrants some caution for bullish trades amid expectations for additional easing by the ECB.
It is worth recalling that the ECB President Christine Lagarde on Wednesday said that the PEPP and TLTROs have proven to be effective and will therefore remain the main tools for adjusting the central bank’s monetary policy. Hence, Lagarde’s comments in a panel discussion about monetary policy at the ECB Forum on Central Banking, later this Thursday, might do little to provide any impetus.
Technical levels to watch
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