EUR/GBP holds steady above mid-0.8600s, moves little after ECB hikes rates by 75 bps

• EUR/GBP refreshes daily low after the ECB announced its policy decision, though lacks follow-through.
• The ECB hikes interest rates by 75 bps and expects to raise interest rates further to dampen demand.
• Investors now await ECB President Lagarde’s remarks at the post-meeting presser for a fresh impetus.

The EUR/GBP cross retreats further from its highest level since mid-June touched earlier this Thursday and refreshes its daily low after the European Central Bank announced its policy decision. The downtick, however, lacks follow-through and spot prices, for now, seem to have stabilized around the 0.8670 area.

As was widely expected, the ECB hiked its benchmark rates by 75 bps this Thursday and struck a more hawkish tone, expecting to raise interest rates further to dampen demand. Given that the move was fully priced in the markets, the announcement fails to impress traders or provide any impetus to the shared currency. That said, a modest uptick in the British pound seems to exert some downward pressure on the EUR/GBP cross.

The new British Prime Minister Liz Truss announces a cap on energy bills for the next two years, which is seen as a welcome development for households. This, in turn, offers some support to sterling, though the worsening outlook for the UK economy continues to act as a headwind. Furthermore, reluctance to place aggressive bets ahead of ECB President Christine Lagarde's post-meeting presser limits the downside for the EUR/GBP cross.

Investors will look for fresh clues about the ECB's near-term monetary policy outlook amid the risk of an extreme energy crisis in Europe and growing recession fears. This, in turn, will play a key role in influencing the sentiment surrounding the shared currency and determining the next leg of a directional move for the EUR/GBP cross.

Technical levels to watch