EUR/GBP price prediction: is a bottom already in place?

The UK’s departure from the European Union led to one of the strongest trends in the currency markets, as reflected by the EUR/GBP cross. It declined by more than one thousand pips without any meaningful sign of a reversal.

Euro’s weakness was exacerbated by the divergence between the two central banks’ monetary policies. While the European Central Bank (ECB) keeps the rates in negative territory, the Bank of England (BOE) has already hiked twice – and plans to hike some more.

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As such, both fundamental and technical factors favored a decline in the EUR/GBP exchange rate. However, staying short at current levels might be a mistake.

EUR/GBP moved in a tight range in 2022

While the price remains inside the downward channel, the bias remains bearish. Also, the series of lower lows and lower highs continues, adding to the bearish sentiment.

But bulls may stage a comeback. Despite the BOE tightening the monetary policy, the market moved in a tight range in 2022.

From a technical perspective, the range might be the bottom bulls expected. If that is the case, a move above the previous lower high would confirm the bottom.

ECB might hike in July

Inflation in the Euro area reached uncomfortable levels for the ECB. Over the weekend, the central bank’s vice-president led to believe that a rate hike in the summer is possible.

Therefore, if the EUR/GBP holds the current lows until the ECB’s July meeting, the chances are that the outcome of that meeting is hawkish for the common currency.

On the flip side, the war in Ukraine is the wild card when trading the euro. European economies were already slowed by the conflict, as several states have already revised down their economic growth projections for the year.

To sum up, the EUR/GBP remains bearish, but unless it makes a new lower low, bulls will join the party. Any hint that the ECB might be closer to a rate hike than the market anticipates would be enough to trigger a rally.