EUR/GBP weaker below 0.87 handle, ECB and UK election in focus

The EUR/GBP cross built on previous session's heavy losses and fell farther below the 0.8700 handle to fresh one-week lows.

Currently trading around 0.8680-75 region, the cross remained under some selling pressure for the second consecutive session amid expectations for a dovish ECB tilt. Wednesday's news report that the ECB could lower its inflation forecast through 2019, due to weaker energy prices, has been the key factor for the shared currency's underperformance against its British counterpart.

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Adding to this, a mildly positive sentiment surrounding the British Pound, despite of uncertainty over the outcome of the UK snap election, further collaborated to the offered tone surrounding the EUR/GBP cross. 

It is worth reporting that the recent polls have been indicating a tighter race. The recent price-action, however, has been pointing to investors’ conviction that the Tories would hold outright majority and hence, continuation of the pair's corrective slide from 2-1/2 month highs touched at the beginning of this week now seems a distinct possibility. 

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Immediate focus, however, would remain on the ECB announcement and the accompanying updated staff economic projections, which will be followed by the ECB President Mario Draghi's presser later during the European session.

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Technical levels to watch

Immediate support is pegged near 0.8660-55 region, below which the cross is likely to accelerate the slide towards 0.8630 horizontal support en-route 0.8600 round figure mark. 

On the flip side, sustained recovery back above the 0.8700 handle now seems to confront fresh supply near 0.8735 level, which if cleared has the potential to lift the cross back towards multi-week highs resistance near 0.8770 region.