The Euro (EUR) has extended its gains against the British Pound (GBP) for the fourth consecutive day, reaching two-month highs following downward revisions to both the Eurozone and UK Services Purchasing Managers’ Index (PMI) figures [1]. The Eurozone's final HCOB Services PMI was revised down to 51.6 from the previously estimated 51.7, while the UK's final S&P Global Services PMI was adjusted to 52.5 from the preliminary 52.8 [1]. Despite these downward revisions, the EUR/GBP pair has rallied nearly 0.5% so far this week, with bulls targeting resistance just above the 0.8600 mark [1].
The Euro's strength is attributed to monetary policy divergence between the European Central Bank (ECB) and the Bank of England (BoE). Investors are anticipating a quarter-point ECB rate hike later this month, bolstered by hawkish remarks from ECB Council member and Bundesbank President Joachim Nagel. In contrast, the BoE is widely expected to keep rates unchanged at its September 17 meeting [1]. This divergence has provided additional support for the Euro against the Pound.
Technical analysis indicates that EUR/GBP broke above a key resistance area between 0.8580 and 0.8585, which was also the top of a triangle pattern, signaling renewed bullish momentum. Momentum indicators remain firmly in bullish territory, although the Relative Strength Index (RSI) is approaching overbought levels, suggesting a potential pullback before further gains. Bulls may encounter resistance between 0.8600 and 0.8610, with the next target around the June 29 high in the 0.8630 area. Immediate support is seen at 0.8585, followed by 0.8565 and 0.8560 [1].
The Euro was the strongest major currency against the US Dollar today, with a 0.12% gain, while the Pound weakened against both the Euro and the Dollar. The currency heat map underscores the Euro's broad strength across major pairs, reinforcing the positive momentum in EUR/GBP [1].
CONCLUSION
EUR/GBP's rally is underpinned by revised Services PMI data and expectations of diverging central bank policies, with technical indicators supporting further upside. The Euro's broad strength and bullish momentum suggest continued market interest, though overbought signals may prompt short-term consolidation. Investors are closely watching upcoming ECB and BoE meetings for further direction.