EUR/GBP holds steady below mid-0.8300s ahead of BoE, ECB policy decisions

• EUR/GBP struggled to capitalize on its modest intraday gains and remained below mid-0.8300s.
• Divergent BoE-ECB monetary policy outlooks continued acting as a headwind and capped gains.
• Investors also seemed reluctant to place directional bets ahead of the key central bank event risks.

The EUR/GBP cross trimmed a part of its modest intraday gains and was last seen trading just a few pips above the daily low, around the 0.8330 area during the early European session.

The cross gained some positive traction during the early part of the trading on Thursday, though the uptick lacked any follow-through and ran out of steam ahead of mid-0.8300s. The upside remains capped amid the divergence between the Bank of England (BoE) and the European Central Bank (ECB) monetary policy outlooks.

The BoE is expected to hike the interest rate again on Thursday, which would be the first back-to-back hikes since 2004. Investors also believe that the UK central bank will signal its approach to start unwinding the £895 billion quantitative easing program, which was seen as a key factor behind sterling's relative outperformance.

Conversely, the ECB could push back against speculations for an early monetary policy action to combat soaring inflation. It is worth recalling that the Eurozone CPI accelerated to another record high and arrived at 5.1% YoY in January, lifting market bets that the ECB could deliver the first rate-hike of 10 bps by July.

Hence, the market focus will remain glued to the key central bank event risks – the BoE and the ECB policy meetings due later this Thursday. In the meantime, investors seemed reluctant to place aggressive directional bets, which further contributed to keeping a lid on any meaningful upside for the EUR/GBP cross.

Technical levels to watch