EUR/GBP turns lower post-ECB, flirts with weekly low around mid-0.8600s ahead of Lagarde

• EUR/GBP remains confined in a narrow band after the ECB hikes interest rates by 75 bps.
• The announcement fails to influence the shared currency as the move was already priced in.
• Investors now look to the post-meeting press conference for short-term trading opportunities.

The EUR/GBP cross edges lower during the mid-European session and slides to a fresh weekly low, around the 0.8650 region after the European Central Bank announced its policy decision.

As was expected, the ECB hikes interest rates by 75 bps for the second successive time in October to tackle stubbornly high inflation. Given that the markets had already priced in another jumbo rate hike, the announcement does little to provide any impetus to the shared currency or the EUR/GBP cross. Investors also prefer to wait on the sidelines and look forward to ECB President Christine Lagarde's comments at the post-meeting conference for clues about the near-term policy outlook.

In the meantime, the latest optimism over the appointment of Rishi Sunak as the new UK Prime Minister continues to underpin the British pound and acts as a headwind for the EUR/GBP cross. Market players see Sunak as someone who can bring stability back after the recent volatility in the markets. Moreover, International Monetary Fund (IMF) Managing Director Kristalina Georgieva told Reuters that she expects new UK PM Sunak to steer Britain towards a path of medium-term fiscal sustainability.

Apart from this, growing worries that the protracted Russia-Ukraine war could drag the Eurozone's economy faster and deeper into recession might continue to cap the upside for the EUR/GBP cross. The fundamental backdrop supports prospects for some meaningful downside for spot prices. That said, the lack of any follow-through selling warrants some caution for aggressive bearish traders.

Technical levels to watch