- EUR/GBP gained strong traction on Thursday and snapped three days of the losing streak.
- The GBP bulls remained on the defensive ahead of the BoE decision and the Scottish election.
- USD selling, upbeat Eurozone Retail Sales underpinned the euro and remained supportive.
The EUR/GBP cross continued scaling higher through the first half of the European session and shot to fresh daily tops, around the 0.8660-65 region in the last hour.
The cross stalled its recent sharp pullback from the 0.8715-20 supply zone and gained strong positive traction on Thursday, snapping three consecutive days of the losing streak. The strong move up was sponsored by the British pound's relative underperformance ahead of the key event risks – the Bank of England policy decision and the Scottish election.
The BoE is expected to leave its monetary policy settings unchanged at the conclusion of the May meeting. The announcement will be accompanied by updated economic projections, which might infuse some volatility around the British pound. Apart from this, the uncertainty over the outcome of the Scottish parliament election acted as a headwind for the sterling.
On the other hand, the shared currency benefitted from the emergence of some fresh selling around the US dollar and was further supported by upbeat Eurozone macro data. According to Eurostat, Retail Sales in the region increase by 2.7% MoM and 12% YoY in March. The readings were better than consensus estimates pointing to a 1.5% and 9.6% growth, respectively.
It, however, remains to be seen if bulls are able to capitalize on the move or the EUR/GBP cross meets with some fresh supply at higher levels. A more hawkish BoE should provide a strong lift to the pound and cap gains for the cross, making it prudent to wait for some follow-through buying before positioning for the resumption of the recent recovery from over one-year lows.