EURGBP pulls back to levels near 0.8700 after rejection from 0.8820

• The euro trims its gains on Thursday and sinks to the 0.8700 area.
• Market sentiment has eased the negative pressure on the British pound.
• EURGBP will continue to consolidate between 0.8600 and 0.8800 — Barclays.

Euro is trading lower on Thursday, extending its reversal from four-week highs at 0.8820 seen on Wednesday. Failure to break above 0.8800 during the early European session has added to the negative pressure, taking the pair to session lows just above 0.8700.

Pound Rebounds Amid Improved Risk Sentiment

The British Pound has managed to trim Thursday’s losses, shedding negative data from previous days, due to the Bank of England’s negative outlook for the UK economy.

In the absence of key macroeconomic data from the UK or the Eurozone, improving risk sentiment, with global equity markets rallying following the release of US CPI data, has helped ease negative pressure on the pound.

In the Eurozone, the member of the Governing Council of the European Central Bank, Isabel Schnabel, has reiterated the bank’s tough stance, stating that “there is no time for a pause in monetary policy”, as inflation expectations remain largely anchored . However, the impact of these comments on the EURGBP has been limited.

EURGBP is expected to remain between 0.8600 and 0.8800 — Barclays

Looking at a broader point of view, FX analysts at Barclays Research see the pair trapped within a consolidation range: “GBP received little support from the BoE last week, which once again put pressure on what they see as excess prices in the markets. Consequently, the recent range of 0.86-0.89 will probably continue to define the trajectory of the pound sterling against the euro in the short term.”

Technical levels to watch