EUR/GBP jumps to over two-week high, holds comfortably above mid-0.8400s

• EUR/GBP regains positive traction on Thursday and climbs back closer to the overnight swing high.
• The BoE’s gloomy outlook is seen as a key factor behind the British pound’s underperformance.
• The post-US CPI USD weakness benefits the euro and remains supportive of the intraday move up.

The EUR/GBP cross catches fresh bids on Thursday and prolongs its intraday positive move through the first half of the European session. The momentum pushes spot prices back above mid-0.8400s in the last hour, closer to over a two-week high touched the previous day.

The back of the Bank of England's gloomy outlook continues to act as a key factor behind the British pound's relative underperformance and offers some support to the EUR/GBP cross. It is worth recalling that the UK central bank painted a particularly bleak picture last week and warned that a prolonged economic recession would start in the fourth quarter.

The shared currency, on the other hand, draws some support from the softer US CPI-induced US dollar weakness. This provides an additional lift to the EUR/GBP cross and contributes to the intraday positive move. That said, Europe's energy supply concerns, which could drag the Eurozone economy faster and deeper into recession, could cap gains for the cross.

In the latest development, the supply of Russian oil to three European countries through Ukraine was suspended as Western sanctions prevented the latter from accepting transit fees. This makes it prudent to wait for strong follow-through selling before confirming that the EUR/GBP cross has formed a near-term bottom and positioning for any further appreciating move.

There isn't any major market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, the market focus now shifts to the Preliminary UK Q2 GDP report, due for release on Friday. The data would play a key role in influencing the near-term sentiment surrounding sterling and provide a fresh directional impetus to the EUR/GBP cross.

Technical levels to watch