The euro eased off from a five-month high against the pound on Thursday, after a report showed that UK consumer confidence rebounded in March from an all-time low recorded in February.
EUR/GBP hit its lowest since Tuesday at 0.8849 during early European trading, before consolidating at 0.8855, losing 0.25 percent. The pair is likely to find support at Tuesday’s low of 0.8821 and resistance at five-month high of 0.8923 hit on Wednesday.
However, analysts said that the single currency continued to get support from expectations over another rate hike by the European Central Bank (ECB) this year.
Earlier on Thursday, the National Building Society said that the index showing consumer confidence in Britain rose to 44 in March from the lowest level of 39 in February.
We will need to see a succession of increases before we can say that confidence has returned anywhere close to pre-recession levels, said Robert Gardner, chief economist of the society.
The single currency also traded lower against the greenback, with EUR/USD hitting a session low of around $1.4390.
“With inflation data showing signs of moderation, IMF officials cautioning the ECB over premature removal of monetary accommodation, and the Fed apparently committed to zero interest rates for the foreseeable future, the EUR is looking increasingly overbought. Unless the EUR can reach higher highs by Friday morning, profit taking ahead of the weekend is the greater likelihood,” said a note from BNY Mellon on Thursday.
However, the ECB on Thursday maintained its hawkish stance, saying that it sees upside risks to price stability and will continue to monitor inflationary pressures very closely.
It is essential that the recent price developments do not give rise to broad-based inflationary pressures over the medium term, the ECB said.
ECB Governing Council member Mario Draghi said that monetary policy remains “accommodative” even after the ECB raised its benchmark rate last week for the first time in almost three years.