EUR/GBP recovers further from one-week low, steadily climbs back closer to mid-0.8600s

• EUR/GBP regains positive traction and moves away from a one-week low touched on Tuesday.
• Mostly better-than-expected Eurozone macro data offers some support to the shared currency.
• The emergence of some selling around the British pound contributes to the intraday move up.
• The new UK PM’s efforts to ease the cost of living crisis, BoE rate hike bets could cap gains.

The EUR/GBP cross catches fresh bids on Wednesday and snaps a two-day losing streak to a one-week low, around the 0.8565 region touched the previous day. The cross adds to its intraday gains and hits a fresh daily high, around the 0.8630-0.8635 area during the first half of the European session.

The shared currency's relative outperformance against its British counterpart comes amid mostly better-than-anticipated economic releases from the Eurozone. According to the official data released earlier this Wednesday, German Industrial Production fell by 0.3% in July against the 0.4% decline expected. Furthermore, the Eurozone GDP was revised higher to show a growth of 0.8% during the second quarter of 2022 vs. 0.6% estimated previously.

Russian President Vladimir Putin said on Wednesday that Nord Stream 1 is practically shut down and added that we can launch Nord Stream 2 gas pipeline if necessary. This, to some extent, helps ease concerns about an extreme energy crisis in Europe and offers additional support to the common currency. This, along with the emergence of some selling around the British pound, provides an additional lift to the EUR/GBP cross.

That said, efforts by the new UK Prime Minister Liz Truss to offset the current cost of living crisis in the UK and bets for aggressive rate hikes by the Bank of England might limit losses for sterling. This, in turn, might keep a lid on any meaningful upside for the EUR/GBP cross. Investors might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the European Central Bank monetary policy meeting on Thursday. 

Technical levels to watch