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  • EUR/GBP witnessed heavy selling for the second consecutive session on Thursday.
  • A strong pickup in demand for the pound was seen exerting pressure on the cross.
  • The euro benefitted from weaker USD and might help limit losses ahead of the ECB.

A sudden pickup in demand for the British pound dragged the EUR/GBP cross to fresh eight-month lows, around the 0.8830 region during the first half of the European trading session.

Following the previous day’s modest bounce of around 25 pips, the cross met with some fresh supply for the second consecutive session on Thursday and now seems poised to prolong the bearish trajectory. The sterling’s relative outperformance against its European counterpart could be attributed to the rapid vaccination campaign and a gradual decrease in COVID-19 cases in the UK.

On the other hand, the shared currency was supported by an offered tone surrounding the US dollar, albeit lacked any strong follow-through amid the possibility of an extension lockdown in the Eurozone. Apart from this, a delay in the rollout of COVID-19 vaccine in Europe further held the euro bulls from placing any aggressive bets ahead of the European Central Bank meeting.

The ECB is scheduled to announce its policy decision later this Thursday at 12:45 GMT and is widely expected to leave its monetary policy settings unchanged. Hence, the key focus will be on any displeasure among policymakers over the high exchange rate of the common currency. This will be followed by the post-meeting press conference at 13:30 GMT.

Investors will also closely scrutinize the ECB President Christine Lagarde’s comments for hints that the central bank may take additional measures in the upcoming meeting to curb further appreciation of the euro. This, in turn, might infuse some volatility and provide some meaningful impetus to the EUR/GBP cross amid absent relevant market moving economic releases.

Technical levels to watch