• EUR/GBP struggles to gain any meaningful traction and remains confined in a range.
• Investors prefer to wait on the sidelines ahead of the BoE and ECB policy decisions.
• The lack of any buying suggests that the recent downtrend is still far from being over.

The EUR/GBP cross extends its sideways consolidative price move on Thursday and remains confined in a narrow trading band around the 0.8600 mark through the early European session. Traders seem reluctant to place directional bets and prefer to wait on the sidelines ahead of the central bank event risks.

The Bank of England will announce its policy decision at 12:00 GMT this Thursday. The UK central bank is widely expected to slow the pace of its policy tightening and deliver a relatively smaller 50 bps rate hike amid signs that inflation in the UK is peaking. In fact, the official data released on Wednesday showed that the UK Consumer Price Index (CPI) decelerated to a 10.7% YoY rate in November from 11.1% in the previous month.

Furthermore, worries about a deeper economic downturn might force the BoE to adopt a gradual approach towards raising interest rates. This, in turn, is holding back traders from placing fresh bullish bets around the British Pound and acting as a tailwind for the EUR/GBP cross. The upside, however, remains capped amid the emergence of some selling around the shared currency, led by a modest US Dollar bounce from a multi-month low.

Apart from this, expectations that the European Central Bank will raise its policy rates at a slower pace, by 50 bps, also contribute to keeping a lid on the EUR/GBP cross. From a technical perspective, the recent subdued price action witnessed over the past three weeks or so could be categorized as a bearish consolidation phase. This, along with the pair's inability to attract any buyers, supports prospects for further losses.

Technical levels to watch