EUR/GBP jumps to three-day highs above 0.8800 as pound tumbles

• Pound among worst performers on Thursday. 
• Euro drops versus dollar, remains firm against Swiss franc. 
• EUR/GBP is up for the third day in a row, back above the 20-day SMA. 

The EUR/GBP is rising for the third day in a row and recently reached a three-day high at 0.8818 before pulling back to 0.8790. A weaker GBP is driving the cross to the upside on Thursday. The cross bottomed on Tuesday at 0.8644, and since then, it had been moving to the upside. It is back above the 20-day Simple Moving Average. The next resistance area is seen at the weekly top around 0.8830, followed by 0.8895. The critical support for the current bias might be seen at 0.8740, an uptrend line from Wednesday’s low. 

The euro and the pound are falling versus the dollar, trimming weekly gains. The decline in GBP/USD is faster and is approaching 1.1100, while EUR/USD is moving toward 0.9800. EUR/CHF remains steady near 0.9700. 

Market participants see the Bank of England and the European Central Bank on the path of further rate hikes over the coming meetings. Although, the actions from the BoE are not only to curb inflation but also to preserve stability in the gilt market. 

The BoE defended on Thursday last week’s interventions in the gilt market, mentioning it prevented a £50bn fire sale of UK bonds that would have led to the brink of a financial crisis. The pound is not yet out of the woods. It remains among the most volatile currencies, and after a sharp recovery, weakness is emerging again.

The minutes of the ECB released on Thursday showed discussions about the magnitude of rate hikes and concerns about the impact of the depreciation of the euro on inflation expectations. “The account of the ECB Council meeting in September point to a growing number of arguments for further significant ECB rate hikes in the near term, while the exact level of the terminal rate remains unclear,” said analysts at Commerzbank. 

Technical levels