- EUR/GBP reversed an early dip to mid-0.9000s amid a pickup in demand for the shared currency.
- A strong bid tone surrounding the British pound might keep a lid on any strong gains for the cross.
- Investors might also refrain from placing aggressive bets ahead of the ECB decision on Thursday.
The EUR/GBP cross quickly recovered around 25 pips from session lows and was last seen trading in the neutral territory, around the 0.9070-75 region.
The cross extended the previous day’s late pullback from two-week tops – levels beyond the 0.9100 mark – and remained depressed through the first half of trading action on Wednesday. The early downtick was sponsored by some follow-through buying around the British pound, which got an additional boost following the release of hotter-than-expected UK consumer inflation figures.
In fact, the headline CPI rose by 0.6% in June as compared to a modest downtick to 0.4% anticipated from 0.5% previous. The yearly rate also came in better than market expectations and edge higher to 1.1% from 1.0% recorded in May. The data eased worries about deflationary pressures from the economic downturn led by the coronavirus-induced lockdowns and underpinned the sterling.
The early downtick turned out to be short-lived, rather attracted some dip-buying near mid-0.9000s. A strong pickup in demand for the shared currency was seen as one of the key factors behind the pair’s sudden bounce during the early European session. However, the upside is likely to remain capped as investors might refrain from placing fresh bullish bets ahead of the ECB on Thursday.
Nevertheless, the near-term bias still seems tilted in favour of bullish traders. A move back above the 0.9100 mark will reinforce the positive outlook and lift the EUR/GBP cross back towards June monthly swing highs resistance near the 0.9175 region.
Technical levels to watch
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