EUR/GBP trims losses, but remains capped below 0.8700

• The euro remains negative on the day, capped below 0.8700.
• The Sunak effect keeps supporting the pound's rally.
• EUR/GBP expected to appreciate towards 0.9000 – SocvGen.

The euro ticked up from the one-week lows at 0.8645 witnessed earlier on Wednesday, although it remains negative on the daily chart. Bullish attempts are capped below 0.8700 and the pair consolidates losses after retreating from 0.8770 highs earlier this week.

The pound maintains the positive tone

Sterling remains moderately bid, still buoyed by the positive market reaction to Rishi Sunak becoming UK’s Prime minister and his pledge to restore economic stability. The delay of a keenly awaited fiscal plan, which was due on October 31, to mid-November has not dented investor’s appetite for the pound, which has rallied to fresh six-week highs against the US dollar

The euro, however, has managed to trim losses with all eyes on the European Central Bank’s monetary policy decision, due on Thursday. The bank is widely expected to hike rates by 75 basis points for the second consecutive time, which has offered some support to the euro.

EUR/GBP is seen appreciating towards 0.90 – SocGen

Kit Juckes, Chief Global FX Strategist at Société Générale sees the pair returning to 0.90: “With the economy surely already in recession and set to suffer from possibly even tighter fiscal policy, sterling is unlikely to enjoy much more of a relief bounce and over time, EUR/GBP is likely to meander slowly up to 0.90 or so.”

Technical levels to watch