EUR/GBP pares BOE-led moves around 0.8950, German inflation, energy crisis in the spotlight

• EUR/GBP picks up bids to reverse the post BOE pullback.
• Hawkish ECB jostled with the BOE’s bond-buying plan but failed to recall the bears.
• Looming economic fears for the UK join hawkish ECBspeak to keep buyers hopeful.
• German inflation may allow traders to witness further upside with firmer HICP numbers.

EUR/GBP prints mild gains around 0.8950 during Thursday’s Asian session, after a volatile day that ended on a positive note.

The cross-currency pair’s latest gains could be linked to the regional currency’s comparative strength considering the hawkish comments from the European Central Bank (ECB). However, softer yields and hopes of the UK’s more efforts to restrict trader confidence could challenge the pair bears.

That said, the Bank of England (BOE) announced a bond-buying program to defend the British Pound (GBP) on Wednesday. The details suggest that the BOE will buy bonds with a maturity of over 20 years and up to 5 billion sterling worth per auction initially. On the other hand, ECB President Christine Lagarde reiterated on Wednesday that they will continue to raise rates in the next several meetings, as reported by Reuters. There were several other ECB Governing Council members namely Olli Rehn, Peter Kazimir, and Robert Holzmann who openly favored a 0.75% rate hike in the next meeting.

Elsewhere, the US 10-year Treasury bond yields slumped the most in six months and allowed equities to consolidate recent losses, which in turn propelled the EUR and drowned the US dollar.

Looking forward, preliminary readings of Germany’s Harmonized Index of Consumer Prices (HICP) for September, expected 10% YoY versus 8.8% prior, will be important to watch for fresh impulse. Also important will be the ECBSpeak and the comments from various BOE policymakers. Above all, risk catalysts are crucial to determine short-term EUR/GBP moves.

Considering the less likely immediate end of the UK’s financial problems, the EUR/GBP prices are likely to remain firmer and can rise further if the Germany data offers a positive surprise.

Technical analysis

A three-day-old bullish triangle restricts immediate EUR/GBP moves between 0.9030 and 0.8850.