The EUR/GBP currency pair experienced a minor rebound on Thursday, rising from the support area at 0.8530 to trade at 0.8543, after having depreciated approximately 0.8% over the previous three days [1]. Despite this uptick, the immediate bearish trend remains intact, with upside attempts lacking conviction and momentum indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) signaling that bearish sentiment continues to dominate [1]. The RSI is just above the 30 level, indicating oversold conditions, while the MACD remains slightly negative [1].
The Euro has struggled this week, pressured by rising oil prices and escalating borrowing costs in France, where government debt has reached its highest levels since 1946, raising concerns about a potential credit crisis [1]. Comments from European Central Bank President Christine Lagarde, who stated that "a measured response is appropriate to keep inflation in check," have further weighed on the Euro [1]. Meanwhile, the Bank of England is preparing for possible monetary tightening, which has supported the Pound to some extent [1].
Rabobank strategists note that while higher short-term interest rates are generally positive for a currency, they see limited room for sustainable gains in the Pound, as more than 100 basis points of policy tightening are already priced in over a 12-month horizon [1]. They suggest that the GBP could soften as rate hike risks are moderated [1]. Rabobank also highlights the upcoming October 28 UK budget as a key focus for markets. If the Labour Party leadership maintains its commitment to fiscal rules, a post-budget relief rally in the Pound is possible, though the Prime Minister's wish list may imply further tax rises, which could negatively impact growth [1].
Technical analysis points to resistance levels at 0.8550 and 0.8565, which must be breached to ease bearish pressure and potentially bring the September 29 highs around 0.8585 back into focus [1]. On the downside, breaking below 0.8530 could target the 0.8515 area and further lows between 0.8480 and 0.8490 [1].
CONCLUSION
EUR/GBP's rebound from 0.8530 is seen as corrective, with bearish momentum still dominating the pair. Market sentiment remains cautious due to Eurozone debt concerns and limited upside for the Pound, with technical resistance levels likely to test any recovery. The upcoming UK budget could be a pivotal event for GBP direction, but growth risks persist.