EUR/GBP reclaims 0.8500 amid mild risk-off market sentiment

• EUR/GBP edges higher on the back of a weaker Sterling across the board.
• EUR/GBP: As long as the EUR/GBP pair remains below 0.8530, the cross-currency has a downward bias.

The EUR/GBP reclaims the 0.8500 level, climbing to fresh two-week highs up 0.12% during the New York session, trading at 0.8506 at the time of writing. The market sentiment remains subdued as three central banks will review their current monetary policy conditions. That, in part, spurred a sell-off of risk-sensitive currencies, like the British pound, which at press time, the GBP/USD pair threatens to break below the 1.3600 figure.

Last Thursday, the European Central Bank (ECB) reviewed its monetary policy stance. The ECB decided to keep rates unchanged. Further, despite high inflation readings, with the Eurozone CPI expanding by 4.1%, it maintained its dovish stance, pushing backward investors’ intentions of a rate hike until late 2023. 

Meanwhile, the Bank of England (BoE) is heading into their monetary policy meeting this week, where investors already priced in a 15-basis point hike rate on November 4. A rate rise in the UK would be the first one since the pandemic. Furthermore, it responds to surging inflation readings, as BoE members Michael Saunders and Governor Andrew Bailey expressed.

On the macroeconomic front, Eurozone PMI’s for October hit the wires. The German Markit Manufacturing PMI came at 57.8 lower than the 58.2 estimated. Furthermore, the Eurozone Markit Manufacturing PMI increased to 58.3, worse than the 58.5 foreseen by analysts.

Despite being lower than expected readings,  production remained strong but was affected by supply chain bottlenecks and logistical problems. Alongside those abovementioned, the shortage of truck drivers continued to hurt the manufacturing sector.

EUR/GBP Price Forecast: Technical outlook

Daily chart

The EUR/GBP cross-currency pair has a downward bias, as shown by the directionless daily moving averages (DMA’s) located above the spot price. At press time, the pair is approaching the confluence of the 50 and the 100-DMA around the 0.8520-40 area, which would oppose strong resistance for EUR buyers. However, the Relative Strength Index (RSI) at 54 aims higher, a bullish signal that diverges with price action. 

To extend the downward trend, EUR/GBP sellers will need to hold the price below the September 16 low at 0.8500. In that outcome, EUR sellers could push the pair towards a renewed re-test of 0.8402, which is 2021 low.

For EUR/GBP buyers to confirm its upward bias, they will need a daily close above 0.8530. In that outcome, the following resistance would be the 200-DMA at 0.8588.