EUR/GBP climbs to two-day high, around mid-0.8300s on better-than-expected Eurozone PMIs

• EUR/GBP edged higher for the second straight day and built on the overnight bounce from sub-0.8300 levels.
• The shared currency’s relative outperformance could be attributed to better-than-expected German PMI prints.
• A dovish assessment of the BoE decision last week kept the GBP bulls on the defensive and extended support.

The EUR/GBP cross edged higher during the early part of the European session and climbed to a two-day high, closer to mid-0.8300s in the last hour.

The cross attracted some dip-buying near the 0.8315 area on Thursday and turned positive for the second successive day, with bulls now looking to build on the overnight bounce from sub-0.8300 levels. The latest leg up followed the release of better-than-expected German PMI prints. The preliminary report showed that business activity in Germany's manufacturing and services sectors continued to expand in March, albeit at a slower pace than recorded in the previous month.

In fact, the Markit Manufacturing PMI declined to 57.6 as against market expectations for a fall to 55.8 from 58.4 in February. Adding to this, the gauge for the services sector fell from 55.8 in the previous month to 55 in March, though was better than consensus estimates pointing to a reading of 53.8. This, in turn, was seen as a key factor behind the shared currency's relative outperformance against its British counterpart and pushed the EUR/GBP cross higher.

On the other hand, sterling was undermined by a dovish assessment of the Bank of England policy decision last week. It is worth recalling that the UK central bank softened its language around the need for future rate hikes. This was seen as another factor that extended some support to the EUR/GBP cross. That said, concerns that the European economy would suffer the most from the spillover effects of the Ukraine crisis could cap gains for the EUR/GBP cross.

Hence, the market focus will remain on fresh developments surrounding the Russia-Ukraine saga. US President Joe Biden will meet with NATO and European leaders in an emergency summit on the Ukraine War. Given its geographical proximity, the incoming headlines will influence the sentiment surrounding the euro and provide some impetus to the EUR/GBP cross.

Technical levels to watch