EUR/GBP returns above 0.8700 with the pound losing momentum

• The euro bounces up at 0.8675 lows and returns above 0.8700.
• The pound loses steam after having rallied following Truss's resignation.
• EUR/GBP remains neutral while below 0.8750. 

The euro is paring losses with the British pound retreating from session highs as the dust from UK PM Liz Truss's resignation settles. The pair found support at 0.8675 to reach 0.8715 at the moment of writing.

Prime Minister Truss’ withdrawal boosts the pound

The market welcomed the announcement of Prime Minister Liz Truss’s resignation earlier today, which sent the pound surging against its main peers and pushed world stocks to session highs.

Sterling’s rally, however, has been short-lived. The ongoing political uncertainty in the UK, with a Tory leadership election scheduled for next week, is keeping GBP bulls in check.

Furthermore, the market has scaled down hopes of an aggressive BoE rate hike at November’s MPC meeting. BoE member Broadbent affirmed on Thursday that the bank will respond to Britain’s tax and spending policies, but has not given any further information about the next monetary policy decision.

EUR/GBP: In a consolidative mood while below 0.8750

From a longer-term perspective, the pair remains trading sideways within recent ranges. On the upside, the pair should extend beyond 0.8750, where the 100 and 200-period SMA on the four-hour chart meet, before aiming for the October 12 high at 0.8865.

On the downside, immediate support lies at 0.8675 (October 19 low). Below here, the next potential targets could be at 0.8565 (September 6 low) and 0.8390/00 (August 8, 17, and 24 lows).

Technical levels to watch