- EUR/GBP staged a goodish bounce from near three-week lows set earlier this Thursday.
- The sterling was undermined by the BoE Governor Bailey’s overnight dovish comments.
- The downward revision of the UK Services PMI further weighed on the British pound.
The EUR/GBP cross built on its steady intraday recovery move from near three-month lows and refreshed daily tops, around the 0.8900 mark in the last hour.
Following an early dip to the 0.8865 region, or the lowest level since June 9, the cross staged a goodish rebound and snapped two-consecutive days of the losing streak. The British pound’s relative outperformance against its European counterpart could be attributed to the Bank of England Governor Andrew Bailey’s dovish comments on Wednesday.
While testifying before parliament Bailey said the downside risk to forecasts from the coronavirus outbreak is much bigger than for Brexit. This comes on the back of Bailey’s remarks last week that the UK central bank has plenty of room to add monetary stimulus, including negative interest rates, which, in turn, increased prospects for more easing.
The sterling was further pressured by Thursday’s downward revision of the UK Services PMI, which came in at 58.8 for August as compared to the preliminary estimate pointing to a reading of 60.1. However, a mildly weaker tone surrounding the common currency, amid sustained USD buying, kept a lid on any further gains for the EUR/GBP cross, at least for now.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the cross might have already bottomed out in the near-term and positioning for any further appreciating move. The BoE Governor Bailey is scheduled to speak again on Thursday, which will influence the GBP price dynamics and produce some trading opportunities.
Technical levels to watch