EUR/GBP picks up bids towards 0.8600 as traders brace for ECB
- EUR/GBP consolidates recent losses, up for third day in the week.
- BOE remains split on monetary policy tightening, ECB policymakers flash mixed signals over tapering.
- Irish food firmer report Brexit disruption, chatters over “October firebreak” take rounds in the UK.
- ECB policymakers are likely to dial back PEPP but optimism isn’t likely to flow.
EUR/GBP remains mildly bid around 0.8585 during the early ECB day, i.e. Thursday. The cross-currency pair dropped the previous day as mixed signals from the European and British central bankers confused markets but the vaccine optimism backed the sellers. However, chatters over the coronavirus outbreak in England and pre-ECB caution seem to recall the bulls of late.
On Wednesday, ECB’s Robert Holzmann backed quicker tapering while Bostjan Vasle teased a “highly accommodative” monetary policy. On the other hand, BOE policymakers testified before the House of Commons in the Monetary Policy Report Hearings as Governor Andrew Bailey said, “BoE split evenly in August on whether basic conditions for rate hike met.”
Elsewhere, business houses from Ireland report worries over the rising prices due to the Brexit-led costs. Also portraying the Brexit woes is the German list of top 10 trading partners which recently dumped the UK. On the positive side, earlier in the week, the UK diplomats extended the “no border checks” time for the Irish food entering into Britain.
It should be noted that the escalating covid woes in England gained a positive sign from Reuters as it quotes Exscientia update saying, “The Bill & Melinda Gates Foundation would make a $35 million equity investment in privately owned Exscientia Ltd to fund the development of antiviral drugs including for the coronavirus.”
Amid these plays, S&P 500 Futures and the US 10-year Treasury yields print mild losses by the press time.
Moving on, risk catalysts can keep the EUR/GBP directed towards the north, with mild moves, ahead of the European Central Bank (ECB) monetary policy meeting. Should the ECB policymakers sounds hawkish the pair could cross the key hurdle.
Technical analysis
A four-month-old descending trend line near 0.8600 becomes the key hurdle to watch for EUR/GBP bulls while 50-DMA near 0.8550 guards short-term downside.