- EUR/GBP regained positive traction on Wednesday and move back closer to weekly tops.
- The euro bulls seemed unaffected by a downward revision of the Eurozone Services PMIs.
- The focus now shifts to the BoE Governor Andrew Bailey’s scheduled speech later today.
The EUR/GBP cross maintained its bid tone through the early part of the European session and was last seen hovering near the top end of its weekly range, just below mid-0.9000s.
Following the previous day’s intraday pullback of around 40 pips, the cross managed to regain positive traction on Wednesday and might now be looking to build on its recent bounce from the 0.8930 region. Concerns about the economic fallout from the imposition of nationwide lockdown in the UK was seen as a key factor behind the British pound relative underperformance against its European counterpart.
On the other hand, the shared currency remained well supported by the prevalent bearish sentiment surrounding the US dollar and seemed rather unaffected by dismal Eurozone data. According to the final version of Markit’s Services PMI, economic activity in Eurozone contracted more sharply than estimated in December and is expected to get worse amid renewed coronavirus-induced lockdowns in the region.
Meanwhile, the UK Services PMI was also revised down to 49.4 from 49.9 estimated early, albeit did little to provide any meaningful impetus to the EUR/GBP cross. Nevertheless, resilience supports prospects for additional gains. Some follow-through buying beyond the 0.9050-55 region will reaffirm the bullish outlook and set the stage for a move back towards reclaiming the 0.9100 round-figure.
Market participants now look forward to a scheduled speech by the Bank of England Governor Andrew Bailey for a fresh impetus. Investors will be looking for clues about any further policy easing by the BoE, which will play a dominant role in influencing the GBP price dynamics. This, in turn, should assist investors to determine the next leg of a directional move for the EUR/GBP cross.
Technical levels to watch