EURGBP consolidates in a range above 0.8700 mark, bias seems tilted in favour of bulls

• EURGBP lacks any firm intraday direction and remains confined in a narrow trading band.
• Talks for aggressive policy tightening by the ECB underpin the Euro and offers support.
• The BoE’s gloomy outlook could weigh on the British Pound and favour bullish traders.

The EURGBP cross struggles to capitalize on the previous day's modest gains and oscillates in a narrow trading band, just above the 0.8700 mark through the early European session on Wednesday.

Talks of a more aggressive policy tightening by the European Central Bank (ECB) continue to benefit the shared currency and offer support to the EURGBP cross. In fact, several ECB policymakers said that higher rates are needed for longer to bring down double-digit inflation in the Eurozone back to its 2% target. This, in turn, pushes the rate-sensitive two-year German bond yield to its highest since December 2008 and is seen acting as a tailwind for the Euro.

The British Pound, on the other hand, draws support from the recent slump in the US Dollar and keeps a lid on the EURGBP cross. That said, the Bank of England's gloomy outlook for the UK economy should undermine the Sterling and supports prospects for some upside for the cross. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024 while indicating a lower terminal peak than is priced into markets.

The fundamental backdrop suggests that the path of least resistance for the EURGBP cross is to the upside and any slide below the 0.8700 round figure could be seen as a buying opportunity. Bulls, however, might wait for a sustained strength beyond the 0.8775-0.8780 resistance zone before placing fresh bets amid absent relevant market-moving economic releases. The market focus now shifts to the release of the Preliminary UK Q3 GDP report on Friday.

Technical levels to watch