EUR / GBP recovers from multi-month lows and rises above the 0.8950 level

• A combination of factors helps EUR / GBP to recover further from multi-month lows.
• Brexit-related uncertainties and weaker UK macro data continue to weigh on the British pound.
• The euro benefits from the subdued demand from the USD and continues to support the bullish move.

The selling bias around the British pound has pushed the EUR / GBP cross to fresh two-day highs, just above the 0.8950 level during the European session on Thursday. At time of writing, the cross remains close to the daily highs, with bullish pressure intact, at 0.8960.

The crossing has built on the previous day’s rebound from the 0.8860 region at a five-month lows, and has continued to gain traction during the first half of Thursday’s trading action. As investors await further updates on Brexit, the British pound has seen some selling for the second day in a row and even more has been seen. pressured by softer UK GDP growth data than expected.

According to data published by the Office for National Statistics, the UK economy expanded 1.1% in September and 15.5% during the third quarter of 2020. The figure was slightly below estimates that pointed to growth of 1.5% month-on-month and 15.8% quarter-on-quarter. On the other hand, the UK industrial and manufacturing production figures for September also failed to meet market expectations.

The British pound has remained under pressure and has had little reaction to the latest comments from Bank of England Governor Andrew Bailey. During a scheduled speech at the Financial Times Global Digital Conference, Bailey has said that they see no great need for yield curve control and has refrained from providing a specific time to adopt negative interest rates..

On the other hand, the common currency has managed to gain some positive traction thanks to a slightly softer tone around the US dollar. This, in turn, has been seen as another factor driving the EUR / GBP cross higher. That being said, the rally lacks a strong follow-up and warrants some caution for bulls amid expectations of further easing from the ECB.

It should be remembered that the President of the ECB, Christine Lagarde, said on Wednesday that the PEPP and the TLTRO have proven their effectiveness and, therefore, will continue to be the main tools to adjust the central bank’s monetary policy. Thus, Lagarde’s comments at a monetary policy panel discussion at the ECB’s Forum on Central Banking later this Thursday could do little to boost momentum.