The EUR/GBP pair saw a spectacular turnaround, rallying more than 50 pips from weekly lows.
The British pound was battered by COVID-19 worries and Bailey’s dovish views.
The Eurozone Manufacturing PMI was revised higher, which helped the common currency.
Despite retreating a few pips from almost two-week highs set earlier on Thursday, the EUR/GBP cross maintained its strong bid tone into the mid-European session. The cross was last seen trading near 0.8595, up almost 0.30 percent on the day.
The EUR/GBP cross caught some aggressive bids and rallied around 50 pips from the 0.8565-60 horizontal support after an early slide to weekly lows. The significant intraday increase was only fueled by the emergence of heavy selling surrounding the British pound in response to comments made by Bank of England Governor Andres Bailey.
Bailey stated at a scheduled speech on Thursday that the central bank expects the cost of living to rise in the coming months, but that this will be temporary. The sterling was pulled down by this, as well as a negative revision to the UK Manufacturing PMI and concerns over the development of the more contagious Delta strain of the coronavirus.
The shared currency, on the other hand, benefited from an upward adjustment of the Manufacturing PMI prints as well as an unexpected drop in the Eurozone unemployment rate in May. The EUR/GBP cross was given a substantial boost by a mix of supportive factors, but bulls unable to profit from the rise or gain acceptance over the 0.8600 level.
In terms of technical analysis, the EUR/GBP cross has so far failed to convincingly break through a resistance defined by a two-month-old declining trend-line resistance. This means traders should hold off on preparing for a continuation of the current upward rise from two-and-a-half-month lows unless they see some substantial follow-through purchasing./n
