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  • EUR/GBP gained traction for the second consecutive session on Thursday.
  • Some repositioning trade ahead of the BoE meeting weighed on the GBP.
  • Concerns about the slow rollout of COVID vaccine in Europe might cap gains.

The EUR/GBP cross edged higher through the early European session and climbed to three-day tops, around the 0.8835-40 region in the last hour.

The cross built on its recovery from sub-0.8800 levels, or near nine-month lows and gained some follow-through traction for the second consecutive session on Thursday. The British pound’s relative underperformance against its European counterpart could be solely attributed to some repositioning trade ahead of the Bank of England (BoE) meeting.

Given the speedy rollout of COVID-19 vaccine in the UK, the Monetary Policy Committee (MPC) is expected to vote unanimously to keep the benchmark interest rate at 0.10% and the size of the Asset Purchase Facility at £895 billion. Hence, the key focus will be on the central bank’s view on negative interest rates and the updated economic projections.

The third nationwide lockdown might force the policymakers to lower their growth forecast for 2021. This will be followed by the post-meeting press conference, where comments by the BoE Governor Andrew Bailey might influence some volatility around the British pound and produce some meaningful trading opportunities around the EUR/GBP cross.

On the other hand, the shared currency was weighed down by sustained US dollar buying and concerns that the slow rollout of COVID-19 vaccine could hamper economic recovery. This, in turn, might hold bullish traders from placing aggressive bets and keep a lid on any meaningful upside for the EUR/GBP cross, at least for the time being.

Hence, it will be prudent to wait for some strong follow-through buying before confirming that a near-term bottom is already in place and positioning for any further appreciating move.

Technical levels to watch