- EUR/GBP meets with a fresh supply on Monday and snaps a three-day winning streak.
- Bets for additional BoE rate hikes underpin the British Pound and act as a headwind.
- The fundamental backdrop favours bears and supports prospects for additional losses.
The EUR/GBP cross comes under fresh selling pressure on Monday and stalls a three-day-old recovery move from the monthly low touched last week. The cross remains depressed through the first half of the European session and is currently placed near the daily low, just above the 0.8800 mark.
Reviving bets for additional rate hikes by the Bank of England (BoE) turn out to be a key factor behind the British Pound’s relative outperformance and drag the EUR/GBP cross lower. The UK PMIs released last week indicated that business activity rose more than expected in February and raised hopes that Britain may be able to avoid a steep economic downturn. This could persuade the BoE to continue tightening its monetary policy to tame inflation.
In contrast, the markets already seem to have fully priced in additional jumbo interest rate hikes by the European Central Bank (ECB) in the coming months. This is reinforced by a rather muted reaction to the recent hawkish commentary by several ECB policymakers and further contributes to the offered tone surrounding the EUR/GBP cross. This, in turn, favours bears and suggests that the path of least hurdle for spot prices is to the downside.
There isn’t any major market-moving economic data due for release on Monday, either from the Eurozone or the UK. Hence, any intraday move-up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Meanwhile, the focus remains glued to the BoE Governor Andrew Bailey’s speech on Thursday and the flash Eurozone consumer inflation figures on Friday, which should provide a fresh impetus to the EUR/GBP cross.