EUR/GBP: bulls capped, how far can the cross rally vs political tensions in the EU?

Currently, EUR/GBP is trading at 0.8596, up 1.04% on the day, having posted a daily high at 0.8628 and low at 0.8501.

EUR/GBP rallied through the 0.86 handle to meet supply just shy of the end of January's highs while sterling starts to stabilise vs the greenback after the BboE sell-off.

BoE leaves policy unchanged, but becomes more optimistic - ING

"BoE did not adopt a more hawkish tone as many had expected. Unanimous decision to leave policy levels (QE) unchanged," explained analysts at Westpac, adding, "Forecast changes appeared to show a stronger economy. However, longer-term inflation pressures reduced. Concerns over actual Brexit impacts remain. GBP and 10yr yields to retreat from recent range highs."

However, the euro has its own problems with the looming Dutch elections taking place this March where risks stay with the populist movement and shrinking globalism as a threat to the EU. While much of the concentration is centred around Trump currently, it may not be long that markets will start factoring the implications of a victory for the anti-immigrant party PVV. for the mean time.

EUR/GBP levels

EUR/GBP is back on the defensive following the recent erosion of its 6-month uptrend, noted analysts at Commerzbank, "The focus has dropped to the base of the cloud at 0.8448, which is currently holding. Below here will trigger losses initially towards the 0.8425 200 day ma and this guards the 0.8304 December low. Intraday Elliott counts are conflicting." Meanwhile, the FXStreet OB/OS Index is reflecting overbought hourly conditions, while the FXStreet Trend Index is slightly bullish.