• Euro rises across the board as EZ yields move higher.
• ECB meeting on Thursday likely to trigger volatility.
• EUR/GBP sideways, without a clear direction.

The EUR/GBP is rising on Wednesday, on the back of a stronger euro across the board. The cross rose from under 0.8500 and peaked at 0.8563. It then pulled back finding support at 0.8550.

The euro gained momentum as German bond yields rose above 1.35% for the first time since 2014. The move takes place ahead of the European Central Bank on Thursday. The central bank is expected to announce the end of the purchase program and to suggest rate hikes at the next meetings.

Analysts at Brown Brothers Harriman point out ECB tightening expectations have picked up ahead of Thursday’s decision. “WIRP suggests liftoff July 21 remains fully priced in. However, markets are now pricing in a potential 50 bp move at either the September 8 or October 27 meetings, followed by a 25 bp hike December 15 that would take the policy rate to 0.75% by year-end, up from 0.5% previously.”

The ECB meeting, the political drama in the UK and a plan from PM Johnson to rewrite parts of the Brexit, warrant volatility ahead for the EUR/GBP cross over the next sessions.

Above 0.8500, below 0.8600

The EUR/GBP is moving in a wide range since late May, finding resistance below 0.8600 and being rejected from under 0.8500. A daily close clearly above 0.8600 should open the doors to more gains, initially to test May’s high at 0.8618. On the flip side, a consolidation below 0.8500 would weaken the euro, leaving the cross vulnerable to a decline to 0.8400.

Technical levels