The Outlook in the Next 24 Hours

EUR/GBP received a boost on Wednesday after strong unemployment data out of Germany. The market shrugged off weaker German retail sales for June, instead concentrating on the 7,000 drop in unemployment this month.

Concerning the outlook for the Euro Pound exchange rate over the course of the next 24 hours Kathleen Brooks at Forex.com says:

"This cross broke above prior resistance at 0.8720 – the double top from 17th July, and has extended gains this morning.  The 0.8815 highs from 25th February are now in view.

"In the short term this cross is looking overbought on the hourly chart, however, 0.8725 – the daily pivot – is a key support level in the very short term.

"While the bulls have the upper hand today, things could change on Thursday as central bank event risk heats up.

"This cross is going to be driven by the outcome of the ECB/ BOE meetings on Thursday. The market may be pricing in the prospect of a more dovish BOE, however, if the BOE does not mention Forward Guidance in a potential statement then we could see the pound recover.

"In contrast, weak inflation in the Eurozone could keep the ECB on the dovish side.

"The yield spread between Germany and the UK has been recovering in recent weeks; however it looks like it may have topped out last week, as you can see in the chart below, even though EURGBP has been ploughing higher.

"Thus, due to the close relationship between the yield spread and EURGBP, if the ECB meeting does not boost German bund yields, and the yield spread does not continue to recover then it is hard to see how EURGBP will continue to extend recent gains.

"Takeaway: In the lead up to the ECB and BOE meetings on Thursday, investors may be nervous to push this pair above 0.8750 towards 0.8800, the 2013 highs from February.

"If the BOE’s statement evades the question of forward guidance then we could see EURGBP reverse course and move back to recent support at 0.8645. Thus, watch out for short term fading of EURGBP strength around 0.8750."