On Thursday, the EUR/GBP got some aggressive bids and climbed back over the 0.8600 level.
The ECB changed its inflation target to a symmetric target of 2%, but did not mention inflation overshoot.
A breach of a descending trend-line resistance has already laid the ground for more advances.
During the mid-European session, the EUR/GBP cross extended its strong intraday advances and moved closer to monthly highs, around 0.8615.
The EUR/GBP cross caught some aggressive bids on Thursday after finding decent support near 0.8535, and reversed its losses recovered over the previous week or so. The relative outperformance of the euro coincides with the release of the results of the European Central Bank’s monetary strategy review.
In accordance with market expectations, the ECB changed to a symmetric inflation target of 2%, rather than a ceiling at that level. The ECB, on the other hand, made no mention of allowing an inflation overshoot. For some investors hoping for assurances that the Fed’s expansionary monetary policy would continue, this was seen as a potential letdown.
In the bond market, there was minimal reaction, however the lack of commitment to maintain stimulus deep into the recovery caused some short-covering in the common currency. The EUR/GBP pair’s strong intraday climb to levels back above the 0.8600 round-figure mark was aided by this, as well as some selling surrounding the British pound.
The EUR/GBP cross currently appears to have verified a near-term bullish breakout of a short-term descending trend-line resistance extending from April swing highs, with the most recent leg up. Follow-through purchasing will strengthen the bullish picture and pave the way for a move to an intermediate resistance level around 0.8645-50./n
