EURGBP pares the biggest daily loss in a month above 0.8700 ahead of UK Q3 GDP

• EURGBP picks up bids to consolidate recent losses amid a sluggish session.
• Hawkish ECBSpeak, fears of downbeat UK Q3 GDP tease buyers ahead of the key data.
• Sentiment remains calm after witnessing a solid risk-on mood the previous day.
• Positive developments over Brexit, BOE’s plan to unwind emergency gilt buying lure sellers.

EURGBP consolidates the biggest daily fall in a month as bulls approach the intraday high near 0.8725 during Friday’s Asian session. In doing so, the cross-currency pair also prepares for the UK’s third quarter (Q3) Gross Domestic Product (GDP) amid a sluggish session after a volatile one.

The quote’s latest upside could also be linked to the hawkish comments from the European Central Bank (ECB) officials and the European currency’s cheering of downbeat US inflation data, as well as the recently softer Fedspeak.

ECB Governing Council member Isabel Schnabel noted on Thursday that inflation expectations in the Eurozone are still broadly anchored but added that risks of high inflation persistence had increased further, as reported by Reuters. On the contrary, an eight-month low print of the US Consumer Price Index (CPI) allowed the US Federal Reserve (Fed) policymakers to back easy rate hikes and drown the US Dollar, which in turn helped the regional currency due to its rivalry.

On the same line could be the headlines from the Bank of England (BOE) suggesting the British central bank’s plan to sell gilts. “The Bank of England said on Thursday that from Nov. 29 it would start to sell back to the market some of the 19 billion pounds ($22 billion) of long-dated and index-linked gilts which it bought last month to quell market turmoil,” said Reuters.

Alternatively, UK PM Rishi Sunak’s optimism to solve the Brexit issue appears to defend the EURGBP bears of late. “British Prime Minister Rishi Sunak said on Thursday he was pleased with the progress the government was making on resolving a long-running post-Brexit trade row with the European Union over Northern Ireland,” reported Reuters.

It should be noted that the calmer markets, after the heavy risk-on mood, also allow the EURGBP pair to prepare for downbeat UK growth numbers. That said, the UK Q3 GDP is expected to print -0.5% QoQ figure versus 0.2% prior.

Also read: UK GDP Preview: Barrelling toward recession. Pound Sterling set to fall?

Other than the UK GDP, final prints of Germany’s Harmonized Index of Consumer Prices (HICP) inflation numbers and comments from the various ECB policymakers will also be important for near-term directions.

Technical analysis

Unless witnessing a daily closing below the 21-DMA support near 0.8690, the EURGBP buyers remain hopeful.