EUR/GBP keeps the red below 0.8800 post-ECB, eyes Lagarde's speech for fresh impetus

• EUR/GBP drifts lower for the second straight day and retreats further from the weekly top.
• The ECB’s 25 bps rate hike fails to impress the Euro bulls or lend any support to the cross.
• Investors now look to ECB President Lagarde's comments for some meaningful impetus.

The EUR/GBP cross extends the overnight retracement slide from the 0.8835 region, or the weekly low and remains under some selling pressure for the second successive day on Thursday. The cross remains on the defensive below the 0.8800 mark through the mid-European session and moves little after the European Central Bank (ECB) announced its policy decision.

As was widely expected, the ECB raises its benchmark interest rates by 25 bps at the end of the May monetary policy meeting and noted that the inflation outlook continues to be too high for too long. In the accompanying policy statement, the central bank reiterated that it stands ready to adjust all of its instruments within its mandate to ensure that inflation returns to its 2% target over the medium term. In the absence of any hawkish surprise, the outlook fails to impress the Euro bulls and exerts downward pressure on the EUR/GBP cross.

The British Pound, on the other hand, continues to draw support from rising bets for another 25 bps rate hike by the Bank of England (BoE). This is seen as another factor weighing on the EUR/GBP cross, though the downside remains cushioned. Traders seem reluctant to place aggressive bets and prefer to wait for ECB President Christine Lagarde's comments at the post-meeting press conference. Investors will look for fresh cues about the future rate-hike path, which will drive the shared currency and provide a fresh impetus to the cross.

Technical levels to watch