- EUR/GBP is struggling to capitalize on its modest intraday gains and remains below 0.8350.
- The divergence in monetary policy outlooks between the BoE and the ECB continue to act as a headwind and limit the pair’s gains.
- Investors also appear reluctant to open directional positions ahead of central bank events.
The crossing EUR/GBP has trimmed a portion of its modest intraday gains and is holding steady around the 0.8330 area at the start of the European session on Thursday.
The cross gained some positive traction during the early part of Thursday, although the rally lacked any follow-through and ran out of steam before reaching the 0.8350 level. The rise remains limited amid the divergence between the monetary policy outlook between the Bank of England (BoE) and the European Central Bank (ECB).
The BoE is expected to raise the interest rate again on Thursday, which would be the first consecutive increase since 2004 after having already raised the rate for the first time after the pandemic in the previous meeting. Investors also believe that the UK central bank will signal his approach to start easing £895bn quantitative easing program, which was seen as a key factor behind the sterling’s strong relative performance.
Conversely, the ECB could dismiss speculation of early action to combat rising inflation. It is worth remembering that the Eurozone CPI accelerated to another all-time high and hit 5.1% y/y in January, raising market expectations that the ECB could make a first interest rate hike of 10 basis points in July.
Therefore, the market’s focus will remain on the BoE and ECB monetary policy meetings scheduled for this Thursday. Investors, meanwhile, seemed reluctant to open aggressive directional positions, further helping to limit any significant upside for the EUR/GBP cross.
EUR/GBP technical levels
Source: Fx Street
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