The EUR/GBP pair fell into a sideways pattern in the European session on Thursday after regaining a significantly bullish momentum on Monday.
The currency pair touched a new four-week high at 0.8417 yesterday before reversing mildly over the past few hours. Today’s correction poses a potential break in the parabolic bull run recorded since Monday.
Interestingly, Monday’s bounce came after the EUR/GBP touched its lowest point since June 2016 at 0.8260. Analysts noted that the recent downtrend did not follow any obvious catalyst and can be traced to investors’ repositioning ahead of the critical European Central Bank (ECB) meeting.
The recent downward trend got tapered by the revived hopes for diplomatic talks towards ending the war in Ukraine. The optimistic sentiment helped offset worries that Europe’s economy would bear the brunt of any spillover effects from the Russia-Ukraine crisis. This helped prop the euro and the EUR/GBP pair.
EUR/GBP Bullish as Pound Falls on Stronger US dollar
Meanwhile, recent indications of a stronger US dollar exerted some bearish sentiment on the Sterling. This market mood should help limit further declines in the EUR/GBP pair in the near term. That said, the forex pair appears to have deviated from a consecutive four-day rally as investors move to the sidelines in anticipation of fresh clues from the latest ECB policy meeting.
Pundits opine that the recent geopolitical crisis might lack the impetus to force the ECB to shift its hawkish stance, as the eurozone witnesses record-high consumer inflation reports. With the ECB refusing to change its outlook, the EUR/GBP could continue on its uptrend in the near term. However, traders need to exercise restraint from placing aggressive bullish bets as risks of a further escalation of the Russia-Ukraine crisis remain.
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