EUR/GBP sticks to recovery gains post-Eurozone GDP/CPI data, lacks follow-through

• EUR/GBP gains some traction on Friday and snaps a five-day losing streak to a multi-month low.
• Mostly upbeat Eurozone Q2 GDP growth figures offer some support to the euro and the cross.
• The European gas crisis and Italian political uncertainty should keep a lid on any further gains.

The EUR/GBP cross gains some positive traction on Friday and moves further away from over a three-month low, around the 0.8345 region touched the previous day. The intraday buying picks up pace during the early part of the European session and pushes spot prices to the 0.8400 mark, or a fresh daily high in the last hour.

Barring a disappointment from the German growth figures, the mostly upbeat preliminary second-quarter GDP prints from the Eurozone, to some extent, eases recession fears. Apart from this, hotter-than-expected flash Eurozone consumer inflation figures turn out to be a key factor behind the shared currency's relative outperformance.

Apart from this, the prevalent US dollar selling bias offers additional support to the euro, which, in turn, is providing a modest lift to the EUR/GBP cross. That said, leading indicators have shown that economic activity in the Eurozone worsened significantly in July. This, along with the looming energy crisis, could cap the common currency.

It is worth recalling that the Russian state-controlled energy giant Gazprom said on Wednesday that gas deliveries to Germany via the Nord Stream 1 pipeline have been cut to 20% of capacity. Apart from this, political instability in Italy - ahead of elections in September - adds to concerns about the regions economic outlook and warrants caution for bulls.

On the other hand, the British pound remains supported by rising bets for a 50 bps rate hike by the Bank of England at its upcoming meeting in August. This could also contribute to keeping a lid on the EUR/GBP cross. Nevertheless, spot prices, for now, have snapped a five-day losing streak, though seem to struggle to find acceptance above the 0.8400 mark.

Technical levels to watch