EUR/GBP spikes to two-and-half-week high, 0.8500 mark back in sight

• EUR/GBP gains traction for the second straight day and climbs to over a two-week high on Friday.
• The BoE’s bleak outlook offsets mostly better-than-expected UK data and undermines the GBP.
• Upbeat Eurozone Industrial Production figures further provide a lift to the cross in the last hour.
• Concerns about the energy crisis in Europe  could act as a headwind for the euro and cap the cross

The EUR/GBP cross attracts some buying for the second straight session on Friday and climbs to a two-and-half-week high during the first half of the European session. The cross is currently trading around the 0.8475-0.8480 region, up over 0.25% for the day.

The British pound continues with its underperformance amid the Bank of England's gloomy outlook, which, in turn, acts as a tailwind for the EUR/GBP cross. It is worth recalling that the UK central bank last week painted a particularly bleak picture and warned that a prolonged recession would start in the fourth quarter. This, to a larger extent, offsets Friday's mostly better-than-expected UK macroeconomic releases, which does little to impress the GBP bulls or hinder the pair's intraday positive move.

Meanwhile, the latest leg of a sharp spike witnessed over the past hour or so follows the release of Eurozone Industrial Production, which surpassed estimates and increased 0.7% MoM in June. That said, the emergence of some US dollar buying could act as a headwind for the shared currency. Apart from this, Europe's energy supply concerns, which could drag the Eurozone economy faster and deeper into recession, could cap gains for the EUR/GBP cross and warrant some caution for aggressive bulls.

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 an extension of the recent recovery move from a four-month low.

Technical levels to watch