EUR/GBP drops to fresh multi-week lows, risks breaking below 0.8900 mark

• EUR/GBP remained under some selling pressure for the fifth consecutive session on Wednesday.
• The GBP remained supported after BoE Governor Bailey downplayed negative rate speculations.
• ECB policymaker Villeroy’s remarks weighed on the euro and further contributed to the downfall.

The EUR/GBP cross dropped to seven-week lows during the early European session, with bears now eyeing a sustained break below the 0.8900 round-figure mark.

The British pound continued outperforming its European counterpart, which, in turn, was seen as one of the key factors dragging the EUR/GBP cross lower for the fifth consecutive session on Wednesday. The sterling got an additional boost after the Bank of England Governor Andrew Bailey downplayed speculation on negative interest rates.

During a speech on Tuesday, Bailey said that there are a lot of issues with negative interest rates and that it was too soon to reach any conclusion about the need for future stimulus. Bailey’s comments indicated that the BoE is likely to wait to see how the economy reacts to Brexit and the third lockdown in the UK before deciding on anything.

On the other hand, the shared currency witnessed some selling after the ECB policymaker, Francois Villeroy de Galhau said that we are closely following the negative effects of the exchange rate. Villeroy further added that the ECB remains committed to the 2% inflation target and will maintain favourable monetary conditions for as long as necessary.

Apart from this, the downfall could further be attributed to some technical selling following the previous day’s break below the 0.8935-30 horizontal support. Given that bearish technical indicators are still far from being in the oversold territory, the EUR/GBP cross seems vulnerable to aim back to test November 2020 swing lows, around the 0.8860 region.

Technical levels to watch